Use these links to rapidly review the documentTABLE OF CONTENTS



UNITED STATESSECURITIES AND EXCHANGE COMMISSIONWASHINGTON, D.C. 20549

---

Form 10-Q

(Mark One)

|ý | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
|- | ---------------------------------------------------------------------------------------

For the quarterly period ended March 31, 2005

OR

|o | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
|- | ----------------------------------------------------------------------------------------

For the transition period
from                             to

Commission file number 333-112279

---

HUNTSMAN LLC(Exact name of registrant as specified in its charter)

|Utah                                                           |  | 87-0533091                          
|-------------------------------------------------------------- |  | ------------------------------------
|(State or other jurisdiction of
incorporation or organization) |  | (I.R.S. Employer
Identification No.)

500 Huntsman Way
Salt Lake City, Utah 84108
(801) 584-5700(Address of principal executive offices and telephone number)

---

Indicate
by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the
preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past
90 days. YES ý    NO o

Indicate by check mark whether the registrant is an accelerated filer (as defined in Exchange Act
Rule 12b-2). YES o    NO ý

On May 9, 2005, 10,000,000 units of membership interest of the registrant were outstanding. There is no established trading market for the registrant's
units of membership interest. All of the registrant's units of membership interest are held by an affiliate.



---





HUNTSMAN LLC
QUARTERLY REPORT ON FORM 10-Q FOR THE QUARTERLY PERIOD
ENDED MARCH 31, 2005

TABLE OF CONTENTS



|        |                       |  |                                                                                      
|------- | --------------------- |  | -------------------------------------------------------------------------------------
|PART I  | FINANCIAL INFORMATION
|ITEM 1. |                       |  | Financial Statements                                                                 
|        |                       |  | Condensed Consolidated Balance Sheets                                                
|        |                       |  | Condensed Consolidated Statements of Operations and Comprehensive Income (Loss)      
|        |                       |  | Condensed Consolidated Statement of Member's Equity (Deficit)                        
|        |                       |  | Condensed Consolidated Statements of Cash Flows                                      
|        |                       |  | Notes to Condensed Consolidated Financial Statements                                 
|ITEM 2. |                       |  | Management's Discussion and Analysis of Financial Condition and Results of Operations
|ITEM 3. |                       |  | Quantitative and Qualitative Disclosures About Market Risk                           
|ITEM 4. |                       |  | Controls and Procedures                                                              
|PART II | OTHER INFORMATION    
|ITEM 1. |                       |  | Legal Proceedings                                                                    
|ITEM 6. |                       |  | Exhibits                                                                             

2

---





PART I. FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

HUNTSMAN LLC AND SUBSIDIARIES        CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED)        (Dollars in Millions)

|                                          |                                                                                                        | March 31,
2005                                  |         | December 31,
2004(1) |        
|----------------------------------------- | ------------------------------------------------------------------------------------------------------ | ----------------------------------------------- | ------- | -------------------- | -------
|ASSETS                                    |                                                                                                        |                                                 |         |                      |        
|Current assets:                           |                                                                                                        |                                                 |         |                      |        
|                                          | Cash and cash equivalents                                                                              |                                                 | $       | 19.0                 |        
|                                          | Restricted cash                                                                                        |                                                 |         | 9.3                  |        
|                                          | Accounts and notes receivables (net of allowance for doubtful accounts of $8.8 and $7.7, respectively) |                                                 |         | 611.3                |        
|                                          | Inventories                                                                                            |                                                 |         | 369.4                |        
|                                          | Prepaid expenses                                                                                       |                                                 |         | 13.7                 |        
|                                          | Deferred income taxes                                                                                  |                                                 |         | 0.7                  |        
|                                          | Other current assets                                                                                   |                                                 |         | 15.4                 |        
|                                          |                                                                                                        |                                                 |         |                      |        
|                                          |                                                                                                        | Total current assets                            |         |                      | 1,038.8
|Property, plant and equipment, net        |                                                                                                        |                                                 | 1,227.9 |                      |        
|Investment in unconsolidated affiliates   |                                                                                                        |                                                 | 205.4   |                      |        
|Intangible assets, net                    |                                                                                                        |                                                 | 32.1    |                      |        
|Goodwill                                  |                                                                                                        |                                                 | 2.3     |                      |        
|Deferred income taxes                     |                                                                                                        |                                                 | 8.3     |                      |        
|Receivables from affilitates              |                                                                                                        |                                                 | 12.1    |                      |        
|Other noncurrent assets                   |                                                                                                        |                                                 | 166.7   |                      |        
|                                          |                                                                                                        |                                                 |         |                      |        
|                                          |                                                                                                        | Total assets                                    |         | $                    | 2,693.6
|                                          |                                                                                                        |                                                 |         |                      |        
|LIABILITIES AND MEMBER'S EQUITY (DEFICIT) |                                                                                                        |                                                 |         |                      |        
|Current liabilities:                      |                                                                                                        |                                                 |         |                      |        
|                                          | Accounts payable                                                                                       |                                                 | $       | 383.0                |        
|                                          | Accrued liabilities                                                                                    |                                                 |         | 226.4                |        
|                                          | Deferred income taxes                                                                                  |                                                 |         | 8.2                  |        
|                                          | Current portion of long-term debt                                                                      |                                                 |         | 15.2                 |        
|                                          |                                                                                                        |                                                 |         |                      |        
|                                          |                                                                                                        | Total current liabilities                       |         |                      | 632.8  
|Long-term debt                            |                                                                                                        |                                                 | 1,590.4 |                      |        
|Long-term debtaffiliates                 |                                                                                                        |                                                 |        |                      |        
|Deferred income taxes                     |                                                                                                        |                                                 | 1.0     |                      |        
|Other noncurrent liabilities              |                                                                                                        |                                                 | 271.0   |                      |        
|                                          |                                                                                                        |                                                 |         |                      |        
|                                          |                                                                                                        | Total liabilities                               |         |                      | 2,495.2
|                                          |                                                                                                        |                                                 |         |                      |        
|Commitments and contingencies (Note 15)   |                                                                                                        |                                                 |         |                      |        
|Member's equity (deficit):                |                                                                                                        |                                                 |         |                      |        
|                                          | Member's equity, 10,000,000 units                                                                      |                                                 |         | 1,428.4              |        
|                                          | Accumulated deficit                                                                                    |                                                 |         | (1,286.7             | )      
|                                          | Accumulated other comprehensive income                                                                 |                                                 |         | 56.7                 |        
|                                          |                                                                                                        |                                                 |         |                      |        
|                                          |                                                                                                        | Total member's equity (deficit)                 |         |                      | 198.4  
|                                          |                                                                                                        |                                                 |         |                      |        
|                                          |                                                                                                        | Total liabilities and member's equity (deficit) |         | $                    | 2,693.6
|                                          |                                                                                                        |                                                 |         |                      |        

---

See accompanying notes to unaudited condensed consolidated financial statements.

3

---



HUNTSMAN LLC AND SUBSIDIARIES        CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND  COMPREHENSIVE INCOME (LOSS) (UNAUDITED)        (Dollars in Millions)

|                                                                     |                                       | Three months ended
March 31, |        
|-------------------------------------------------------------------- | ------------------------------------- | ---------------------------- | -------
|
|Revenues:                                                            |                                       |                              |        
|                                                                     | Trade sales                           |                              | $      
|                                                                     | Related party sales                   |                              |        
|                                                                     |                                       |                              |        
|                                                                     |                                       | Total revenues               |        
|Cost of goods sold                                                   |                                       |                              | 1,043.1
|                                                                     |                                       |                              |        
|Gross profit                                                         |                                       |                              | 161.4  
|Expenses:                                                            |                                       |                              |        
|                                                                     | Selling, general and administrative   |                              |        
|                                                                     | Research and development              |                              |        
|                                                                     | Other operating income                |                              |        
|                                                                     | Restructuring and plant closing costs |                              |        
|                                                                     |                                       |                              |        
|                                                                     |                                       | Total expenses               |        
|                                                                     |                                       |                              |        
|Operating income                                                     |                                       |                              | 116.1  
|Interest expense, net                                                |                                       |                              | (40.7  
|Equity in income (losses) of investment in unconsolidated affiliates |                                       |                              | 34.9   
|Other expense                                                        |                                       |                              | (38.5  
|                                                                     |                                       |                              |        
|Income (loss) before income tax benefit                              |                                       |                              | 71.8   
|Income tax benefit                                                   |                                       |                              | 0.8    
|                                                                     |                                       |                              |        
|Net income (loss)                                                    |                                       |                              | 72.6   
|Other comprehensive (loss) income                                    |                                       |                              | (26.7  
|                                                                     |                                       |                              |        
|Comprehensive income (loss)                                          |                                       | $                            | 45.9   
|                                                                     |                                       |                              |        

---

See
accompanying notes to unaudited condensed consolidated financial statements.

4

---





HUNTSMAN LLC AND SUBSIDIARIES        CONDENSED CONSOLIDATED STATEMENT OF MEMBER'S EQUITY (DEFICIT)        (UNAUDITED)        (Dollars in Millions)

|                           |  | Member's equity |  |   |         |  |   |          |  
|-------------------------- |  | --------------- |  | - | ------- |  | - | -------- | -
|
|
|Balance, December 31, 2004 |  | 10,000,000      |  | $ | 1,095.2 |  | $ | (1,359.3 | )
|Net income                 |  |                |  |   |        |  |   | 72.6     |  
|Other comprehensive loss   |  |                |  |   |        |  |   |         |  
|Contribution from parent   |  |                |  |   | 333.2   |  |   |         |  
|                           |  |                 |  |   |         |  |   |          |  
|Balance, March 31, 2005    |  | 10,000,000      |  | $ | 1,428.4 |  | $ | (1,286.7 | )
|                           |  |                 |  |   |         |  |   |          |  

See
accompanying notes to unaudited condensed consolidated financial statements.

5

---



HUNTSMAN LLC AND SUBSIDIARIES        CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)        (Dollars in Millions)

Three months ended
March 31,2005

2004(1)Cash Flows From Operating Activities:Net income (loss)

$
72.6

$
(55.0
)Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities:Equity in (earnings) losses of investment in unconsolidated affiliates


(34.9
)

39.1Depreciation and amortization


31.0


32.6Provision for (recovery of) losses on accounts receivable


1.2


(1.9
)Loss on disposal of assets


0.8


0.2Loss on early extinguishment of debt


38.3


1.9Noncash interest expense


0.9


1.7Noncash interest expense on affiliate debt





0.3Deferred income taxes


(0.1
)

(0.9
)Changes in operating assets and liabilities:Accounts and notes receivables


2.0


(45.0
)Inventories


(31.5
)

11.4Prepaid expenses


8.3


11.0Other current assets


(0.5
)

(1.5
)Other noncurrent assets


2.4


(6.2
)Accounts payable


41.5


0.7Accrued liabilities


(34.0
)

(3.8
)Other noncurrent liabilities


2.2


0.8Net cash provided by (used in) operating activities


100.2


(14.6
)Investing Activities:Capital expenditures


(20.7
)

(15.9
)Change in restricted cash


(0.4
)

1.8Net cash used in investing activities


(21.1
)

(14.1
)Financing Activities:Net (repayment) borrowings under revolving loan facilities


(60.8
)

72.8Repayment of long-term debt


(312.0
)

(38.6
)Cost of early retirement of debt


(31.7
)

Debt issuance costs


(0.2
)

Capital contribution from parent


333.2


Net cash (used in) provided by financing activities


(71.5
)

34.2Effect of exchange rate changes on cash


(0.3
)

(0.7
)Increase in cash and cash equivalents


7.3


4.8Cash and cash equivalents at beginning of period


11.7


19.5Cash and cash equivalents at end of period

$
19.0

$
24.3Supplemental cash flow information:Cash paid for interest

$
38.5

$
26.3Cash paid for income taxes


0.2


0.3


---

See accompanying notes to unaudited condensed consolidated financial statements.

6

---





HUNTSMAN LLC AND SUBSIDIARIES        NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS        (UNAUDITED)

1.     GENERAL

Certain Definitions

For convenience in this report, the terms "Company," "our," "us" or "we" may be used to refer to Huntsman LLC and, unless the context otherwise requires, its
subsidiaries. In this report, "HI" refers to Huntsman International LLC, "HIH" refers to Huntsman International Holdings LLC, "Huntsman Specialty" refers to Huntsman Specialty Chemicals Corporation,
"HMP" refers to HMP Equity Holdings Corporation, "Huntsman Holdings" refers to Huntsman Holdings, LLC, "Huntsman Corporation" refers to Huntsman Corporation and its predecessors, and, unless the
context otherwise requires, their subsidiaries, "AdMat" refers to Huntsman Advanced Materials LLC and, unless the context otherwise requires, its subsidiaries, and "MatlinPatterson" refers to
MatlinPatterson Global Opportunities Partners L.P. and its affiliates.

Company

We are a Utah limited liability company and all of our units of interest are owned by Huntsman Corporation.

Prior
to February 16, 2005, we were owned by HMP. On February 16, 2005, Huntsman Corporation completed an initial public offering of common and preferred stock. Net
proceeds to Huntsman Corporation from the offering were approximately $1,500 million, substantially all of which has been used to repay outstanding indebtedness of certain of Huntsman
Corporation's subsidiaries, including HMP, our Company and HIH. In connection with the offering, Huntsman Corporation and certain affiliates engaged in a series of reorganization transactions such
that we are now a direct, 100% owned subsidiary of Huntsman Corporation.

HIH
is a global manufacturer and marketer of polyurethanes, amines, surfactants, titanium dioxide ("TiO2") and basic petrochemicals. HIH and its subsidiaries, including HI,
are separately financed from us, their debt is non-recourse to us, and we are not obligated to make cash contributions to, or investments in, HIH and its subsidiaries. Prior to
February 16, 2005, we owned 60% of the membership interests of HIH. In connection with the Huntsman Corporation reorganization transactions, our ownership of HIH was reduced to 42% effective
February 16, 2005 from 60% as of December 31, 2004. Accordingly, beginning in March 2005, we no longer consolidate HIH with our results of operations. For financial reporting
purposes this was considered a reorganization of entities under common control, accordingly, we no longer consolidated HIH with our results of operations beginning in March 2005 and have
reclassified our financial statements to reflect our membership interest in HIH using the equity method for all periods presented.

Business

We are a manufacturer and marketer of a wide range of chemical products that are sold to diversified consumer and industrial end markets. We have 53 primary
manufacturing facilities located in North America, Europe, Asia, Australia, South America and Africa and sell our products globally through our three principal business segments: Performance Products,
Polymers and Base Chemicals.

Principles of Consolidation

Our consolidated financial statements include the accounts of our majority-owned subsidiaries and variable interest entities for which we are the primary
beneficiary.

7

---



Interim Financial Statements

Our unaudited interim consolidated financial statements were prepared in accordance with accounting principles generally accepted in the United States of America
("GAAP") and in management's opinion, reflect all adjustments, consisting only of normal recurring adjustments, necessary for a fair presentation of results of operations, financial position and cash
flows for the periods presented. Results for interim periods are not necessarily indicative of those to be expected for the full year. These consolidated financial statements should be read in
conjunction with the audited consolidated financial statements and notes to consolidated financial statements included in our Annual Report on Form 10-K for the year ended
December 31, 2004. Information in this report for dates and periods prior to December 31, 2004 differs from amounts previously presented due to the reorganization transaction as
discussed in "Company" above.

Use of Estimates

The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets
and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual
results could differ from those estimates.

Reclassifications

Certain amounts in the consolidated financial statements for prior periods have been reclassified to conform with the current presentation.

2.     RECENTLY ISSUED FINANCIAL ACCOUNTING STANDARDS

In January 2003, the Financial Accounting Standards Board ("FASB") issued Financial Interpretation No. ("FIN") 46,
"Consolidation of Variable Interest Entities." FIN 46 addresses the requirements for business enterprises to consolidate related entities, for
which they do not have controlling interests through voting or other rights, if they are determined to be the primary beneficiary as a result of variable economic interests. Transfers to a qualifying
special purpose entity are not subject to this interpretation. In December 2003, the FASB issued a complete replacement of FIN 46 (FIN 46R), to clarify certain complexities. We
adopted this financial interpretation on January 1, 2005, as required. The impact of FIN 46R was not significant.

In
November 2004, the FASB issued Statement of Financial Accounting Standards ("SFAS") No. 151, "Inventory Costsan amendment of ARB
No. 43." SFAS No. 151 requires abnormal amounts of idle facility expense, freight, handling costs, and wasted material to be recognized as current-period charges.
It also requires that allocation of fixed production overhead to the costs of conversion be based on the normal capacity of the production facilities. The requirements of the standard will be
effective for inventory costs incurred during fiscal years beginning after June 15, 2005. We are reviewing SFAS No. 151 to determine the statement's impact on our consolidated financial
statements.

In
December 2004, the FASB issued SFAS No. 153,"Exchanges of Nonmonetary Assetsan amendment of APB Opinion
No. 29."SFAS No. 153 addresses the measurement of exchanges of nonmonetary assets and eliminates the exception from fair value measurement for nonmonetary
exchanges of similar productive assets in APB Opinion No. 29 and replaces it with an exception for exchanges that do not have commercial substance. SFAS No. 153 specifies that a
nonmonetary exchange has commercial substance if the future cash flows of the entity are expected to change significantly as a result of the exchange. The provisions of this standard are effective for
nonmonetary exchanges occurring in fiscal periods beginning after June 15, 2005. We will apply this standard prospectively.

8

---



In
December 2004, the FASB issued SFAS No. 123R,"Share Based Payment."SFAS No. 123R requires entities to measure
the cost of employee services received in exchange for an award of equity instruments based on the grant-date fair value of the award. That cost will be recognized over the period during
which the employee is required to provide services in exchange for the award. This standard eliminates the alternative to use the intrinsic value method of accounting for share based payments as
previously provided in APB Opinion No. 25,"Accounting for Stock Issued to Employees."We adopted SFAS No. 123R effective
January 1, 2005, and have applied this standard prospectively to share-based awards issued to our employees in connection with Huntsman Corporation's initial public offering. In connection with
Huntsman Corporation's initial public offering of common and preferred stock on February 16, 2005, certain of our employees received Huntsman Corporation stock options and
restricted stock. Accordingly, we were allocated share-based compensation expense of $0.7 million during the three months ended March 31, 2005. We did not have share-based awards prior
to the awards issued in connection with Huntsman Corporation's initial public offering.

In
March 2005, the FASB issued FIN 47,"Accounting for Conditional Asset Retirement Obligations."FIN 47 clarifies
the termconditional asset retirement obligationused in SFAS No. 143,"Accounting for Asset Retirement
Obligations,"and clarifies when an entity would have sufficient information to reasonably estimate the fair value of an asset retirement obligation. FIN 47 is effective
no later than the end of December 2005. We are reviewing FIN 47 to determine its impact on our financial statements.

In
March 2005, the Emerging Issues Task Force issued a preliminary consensus on issue 04-13, "Accounting for Purchases and Sales of
Inventory with the Same Counterparty," that, if adopted, would require companies to recognize an exchange of finished goods for raw materials or
work-in-process within the same line of business at fair value. All other exchanges of inventory would be reflected at the recorded amount. We are evaluating the impact of this
preliminary consensus to determine its impact on our results of operations.

3.     INVENTORIES

Inventories consist of the following (dollars in millions):

March 31,
2005

December 31,
2004Raw materials and supplies

$
136.2

$
106.0Work in progress


17.9


16.7Finished goods


306.0


297.5Total


460.1


420.2LIFO reserves


(90.5
)

(81.0
)Lower of cost or market reserves


(0.2
)

(0.4
)Net

$
369.4

$
338.8


As
of March 31, 2005 and December 31, 2004, approximately 46.9% and 56.2%, respectively, of inventories were recorded using the last-in, first-out
cost method ("LIFO"). At March 31, 2005 and December 31, 2004, the excess of current cost over the stated LIFO value was $90.5 million and $81.0 million, respectively.

In
the normal course of operations, we at times exchange raw materials and finished goods with other companies for the purpose of reducing transportation costs. The net open exchange
positions are valued at our cost. Net amounts deducted from or added to inventory under open exchange agreements, which represent the net amounts payable or receivable by us under open exchange

9

---



agreements,
were approximately $19.5 million payable and $10.2 million payable (72.2 million and 38.5 million pounds) at March 31, 2005 and December 31, 2004,
respectively.

4.     PROPERTY, PLANT AND EQUIPMENT

The cost and accumulated depreciation of property, plant and equipment are as follows (dollars in millions):

March 31,
2005

December 31,
2004Land

$
66.2

$
67.1Buildings


174.0


178.5Plant and equipment


2,099.6


2,063.1Construction in progress


61.8


65.7Total


2,401.6


2,374.5Less accumulated depreciation


(1,173.7
)

(1,142.4
)Net

$
1,227.9

$
1,232.1


Depreciation
expense for the three months ended March 31, 2005 and 2004 was $30.1 million and $31.2 million, respectively.

Property,
plant and equipment includes gross assets acquired under capital leases of $4.9 million at both March 31, 2005 and December 31, 2004; related amounts
included in accumulated depreciation were $1.6 million and $1.5 million at March 31, 2005 and December 31, 2004, respectively.

5.     INVESTMENT IN UNCONSOLIDATED AFFILIATES

Our ownership percentage and investment in unconsolidated affiliates were as follows (dollars in millions):

March 31,
2005

December 31,
2004Equity Method:Polystyrene Australia Pty Ltd. (50%)

$
4.7

$
4.7Sasol-Huntsman GmbH and Co. KG (50%)


18.9


17.5HIH (42%)


179.3


171.3Total


202.9


193.5Cost Method:Gulf Advanced Chemicals Industry Corporation (4.35%)


2.5


2.5Total Investment

$
205.4

$
196.0


10

---



The
following is summarized income statement information for HIH for the three months ended March 31, 2005 and 2004 (dollars in millions):

Three Months
Ended
March 31,
2005

Three Months
Ended
March 31,
2004Total revenues

$
1,961.9

$
1,498.1Cost of goods sold


1,605.5


1,350.0Gross profit


356.4


148.1Operating expenses


137.1


108.7Operating income


219.3


39.4Interest expense, net


(83.8
)

(97.4
)Other non-operating expense


(38.9
)

(3.7
)Income (loss) before income taxes


96.6


(61.7
)Income tax expense


(23.5
)

(3.6
)Minority interests in earnings


(0.1
)

Net income (loss)

$
73.0

$
(65.3
)


6.     INTANGIBLE ASSETS

The gross carrying amount and accumulated amortization of intangible assets are as follows (dollars in millions):

|                                    |  | March 31, 2005 |      | December 31, 2004
|----------------------------------- |  | -------------- | ---- | -----------------
|
|Patents, trademarks, and technology |  | $              | 57.6 |                  
|Licenses and other agreements       |  |                | 18.3 |                  
|Other intangibles                   |  |                | 1.7  |                  
|                                    |  |                |      |                  
|Total                               |  | $              | 77.6 |                  
|                                    |  |                |      |                  

Amortization
expense was $0.9 million and $1.4 million for the three months ended March 31, 2005 and 2004, respectively.

7.     OTHER NONCURRENT ASSETS

Other noncurrent assets consist of the following (dollars in millions):

March 31,
2005

December 31,
2004Prepaid pension costs

$
6.8

$
1.2Debt issuance costs


22.0


28.9Capitalized turnaround expense


40.9


43.9Spare parts inventory


48.5


46.3Other noncurrent assets


48.5


58.9Total

$
166.7

$
179.2


11

---



8.     ACCRUED LIABILITIES

Accrued liabilities consist of the following (dollars in millions):

March 31,
2005

December 31,
2004Payroll, severance and related costs

$
38.1

$
59.2Interest


27.3


38.7Volume and rebates accruals


21.6


30.3Income taxes


22.7


22.6Taxes (property and VAT)


24.1


41.3Restructuring and plant closing costs


9.1


11.2Environmental accruals


2.0


2.0Other miscellaneous accruals


81.5


55.7Total

$
226.4

$
261.0


9.     OTHER NONCURRENT LIABILITIES

Other noncurrent liabilities consist of the following (dollars in millions):

March 31,
2005

December 31,
2004Pension liabilities

$
77.3

$
142.6Other postretirement benefits


70.7


66.3Environmental accruals


12.2


11.9Restructuring and plant closing costs


2.4


2.3Fair value of interest derivative


1.3


8.3Other noncurrent liabilities


107.1


40.5Total

$
271.0

$
271.9


10.   RESTRUCTURING AND PLANT CLOSING COSTS

As of March 31, 2005, accrued restructuring and plant closing costs by type of cost and activity consist of the following (dollars in millions):

|                                            |  | Workforce
reductions(1) |      | Demolition and
decommissioning |   | Non-cancelable
lease costs |  | Other
restructuring
costs |     | Total(2) |  
|------------------------------------------- |  | ----------------------- | ---- | ------------------------------ | - | -------------------------- |  | ------------------------- | --- | -------- | -
|Accrued liabilities as of December 31, 2004 |  | $                       | 11.0 |                                | $ | 2.5                        |  | $                         |    |          | $
|2005 charges for 2004 activities            |  |                         | 0.3  |                                |   |                           |  |                           | 0.5 |          |  
|2005 payments for 2004 activities           |  |                         | (2.4 | )                              |   |                           |  |                           |    |          |  
|Foreign currency effect on reserve balance  |  |                         | (0.1 | )                              |   |                           |  |                           |    |          |  
|                                            |  |                         |      |                                |   |                            |  |                           |     |          |  
|Accrued liabilities as of March 31, 2005    |  | $                       | 8.8  |                                | $ | 2.5                        |  | $                         | 0.5 |          | $
|                                            |  |                         |      |                                |   |                            |  |                           |     |          |  

---

12

---



March 31,
2005

December 31,
20042001 activities

$
2.8

$
2.82004 activities


8.1


10.0Foreign currency effect on reserve balance


0.6


0.7Total

$
11.5

$
13.5


Details
with respect to our reserves for restructuring and plant closing costs are provided below by segments and activity (dollars in millions):

|                                                                             |                                              | Performance
Products |      | Polymers |   | Base
Chemicals |   | Total |     
|---------------------------------------------------------------------------- | -------------------------------------------- | -------------------- | ---- | -------- | - | -------------- | - | ----- | ----
|Accrued liabilities as of December 31, 2004                                  |                                              | $                    | 7.7  |          | $ | 5.8            |   | $     |    
|2005 charges for 2004 activities                                             |                                              |                      | 1.0  |          |   | 1.9            |   |       | 0.5 
|2005 payments for 2004 activities                                            |                                              |                      | (2.3 | )        |   | (2.6           | ) |       | (0.4
|Foreign currency effect on reserve balance                                   |                                              |                      | (0.1 | )        |   |               |   |       |    
|                                                                             |                                              |                      |      |          |   |                |   |       |     
|Accrued liabilities as of March 31, 2005                                     |                                              | $                    | 6.3  |          | $ | 5.1            |   | $     | 0.1 
|Current portion of restructuring reserve                                     |                                              | $                    | 6.3  |          | $ | 2.7            |   | $     | 0.1 
|Long-term portion of restructuring reserve                                   |                                              |                      |     |          |   | 2.4            |   |       |    
|Estimated additional future cash charges for current restructuring projects: |                                              |                      |      |          |   |                |   |       |     
|                                                                             | Estimated additional charges within one year |                      | $    | 5.6      |   | $              |  |       | $   
|                                                                             | Estimated additional charges beyond one year |                      | $    |         |   | $              |  |       | $   



As
of March 31, 2005 and December 31, 2004, we had reserves for restructuring and plant closing costs of $11.5 million and $13.5 million, respectively. During
the three months ended March 31, 2005 we recorded additional charges of $3.4 million (all of which is payable in cash) for workforce reductions, non-cancelable lease costs,
and other restructuring costs associated with closure or curtailment of activities at our smaller, less efficient manufacturing facilities. During the first quarter of 2005, we made cash payments
against these reserves of $5.3 million.

As
of December 31, 2004, our Performance Products segment reserve consisted of $7.7 million related to various restructuring programs, mainly in connection with the closure
of our Guelph, Ontario, St. Louis, Missouri and Austin, Texas facilities. During the three months ended March 31, 2005, our Performance Products segment recorded restructuring charges of
$1.0 million related to 2004 activities, all of which is payable in cash, and made cash payments of $2.3 million. These restructuring activities are expected to result in additional
charges of approximately $5.6 million in 2005.

As
of December 31, 2004, our Polymers segment reserve consisted of $5.8 million related primarily to the closure of an Australian manufacturing unit and restructuring
activities at our Odessa, Texas and Mansonville, Canada facilities. During the three months ended March 31, 2005, our Polymers segment recorded restructuring charges of $1.9 million
related to these activities, all of which are payable in cash, and made cash payments of $2.6 million. These restructuring activities are not expected to result in any additional material
restructuring charges.

During
the three months ended March 31, 2005, our Base Chemicals segment recorded restructuring charges of $0.5 million related to the relocation of our corporate offices
to The

13

---



Woodlands,
Texas and the consolidation of our U.S. purchasing functions, all of which are payable in cash, and made cash payments of $0.4 million.

11.   LONG-TERM DEBT

Long-term debt outstanding as of March 31, 2005 and December 31, 2004 is as follows (dollars in millions):

March 31,
2005

December 31,
2004Senior secured credit facilities:Term Loan B

$
715.0

$
715.0Revolving facility


61.3


125.0Other debt:Huntsman LLC senior secured notes


293.3


451.1Huntsman LLC senior unsecured fixed rate notes


198.0


300.0Huntsman LLC senior unsecured floating rate notes


100.0


100.0Huntsman LLC senior subordinated fixed rate notes


44.2


44.2Huntsman LLC senior subordinated floating rate notes


15.1


15.1Huntsman Specialty Chemicals Corporation subordinated note


101.6


101.2Huntsman Australia Holdings Pty Ltd (HCA) credit facilities


43.9


43.2Huntsman Corporation Chemical Company Australia (HCCA) credit facilities


17.1


16.0Subordinated note and accrued interestaffiliate





40.9Term note payable to a bank


8.8


9.0Other


7.3


17.5Total debt

$
1,605.6

$
1,978.2Current portion of long-term debt

$
15.2

$
25.3Long-term debt


1,590.4


1,912.0Long-term debtaffiliate





40.9Total debt

$
1,605.6

$
1,978.2


Senior Secured Credit Facilities (HLLC Credit Facilities)

On October 14, 2004, we completed a $1,065 million refinancing of our senior secured credit facilities (as refinanced, the "HLLC Credit
Facilities"). The HLLC Credit Facilities consist of a $350 million revolving credit facility due October 2009 (the "HLLC Revolving Facility") and a $715 million term loan B
facility due March 2010 (the "HLLC Term Facility"). Proceeds of the refinancing were used to repay in full the outstanding borrowings under our prior senior secured credit facilities. The HLLC
Term Facility has scheduled annual amortization payments of approximately $7 million, with the remaining balance due at maturity.

The
HLLC Revolving Facility is secured by a first priority lien on substantially all of our current and intangible assets and those of our domestic restricted subsidiaries; and is
secured by a second priority lien on substantially all of our property, plant and equipment and those of our restricted domestic subsidiaries and our indirect equity interest in HIH. The HLLC Term
Facility is secured by a first priority lien on substantially all of our property, plant and equipment and that of our restricted domestic subsidiaries and our indirect equity interest in HIH; and by
a second priority lien on substantially all of our current and intangible assets and those of our restricted domestic subsidiaries.

14

---



The
HLLC Credit Facilities are also guaranteed by Huntsman Specialty Chemicals Holdings Corporation and Huntsman Specialty and by our domestic restricted subsidiaries (collectively, the "HLLC
Guarantors"). Neither HIH nor HI is our restricted subsidiary and they are not HLLC Guarantors.

The
HLLC Revolving Facility is subject to a borrowing base of accounts receivable and inventory and is available for general corporate purposes. Borrowings under the HLLC Revolving
Facility bear interest, at our option, at a rate equal to (i) a LIBOR-based eurocurrency rate plus an applicable margin of 2.25%, or (ii) a prime-based rate plus an applicable margin of
1.25%. The HLLC Revolving Facility allows us to borrow up to $50 million secured by letters of credit; however, the $350 million revolving credit facility is reduced
dollar-for-dollar by any letters of credit outstanding.

As
of March 31, 2005, the weighted average interest rate on our senior credit facilities was 5.9%, excluding the impact of interest rate hedges. As of March 31, 2005, the
HLLC Revolving Facility and HLLC Term Facility bear interest at LIBOR plus 2.25% per year and LIBOR plus 3.0% per year, respectively. In accordance with the HLLC Term Facility agreement, as a result
of Huntsman Corporation's initial public offering of common and preferred stock and the use of offering proceeds for the permanent reduction of indebtedness by us, the HLLC Term Facility interest rate
margin decreased from LIBOR plus 3.50% to LIBOR plus 3.0%. The agreements governing the HLLC Credit Facilities contain customary financial covenants; covenants relating to the incurrence of debt, the
purchase and sale of assets, limitations on investments and affiliate transactions; change of control provisions; events of default provisions; and acceleration provisions. Management believes that we
were in compliance with the covenants of the HLLC Credit Facilities as of March 31, 2005.

Senior Secured Notes (2003 Secured Notes)

On September 30, 2003, we sold $380 million aggregate principal amount of 11.625% senior secured notes due October 15, 2010 at an issue price
of 98.8% (the "September 2003 Offering"). On December 3, 2003, we sold an additional $75.4 million aggregate principal amount of senior secured notes (collectively with the notes
sold in the September 2003 Offering, the "HLLC Senior Secured Notes") at an issue price of 99.5%. Interest on the HLLC Senior Secured Notes is payable semiannually on
April 15 and October 15. The effective interest rate is 11.9%. The HLLC Senior Secured Notes are effectively subordinated to all our obligations under the HLLC Revolving Facility and
rankpari passuwith the HLLC Term Facility. The HLLC Senior Secured Notes are guaranteed by the HLLC Guarantors.

The
HLLC Senior Secured Notes are redeemable after October 15, 2007 at 105.813% of the principal amount thereof, declining ratably to par on and after October 15, 2009. At
any time prior to October 15, 2006, we may redeem up to 35% of the aggregate principal amount of the HLLC Senior Secured Notes at a redemption price of 111.625% with the net cash proceeds of a
qualified equity offering. As a result of Huntsman Corporation's initial public offering of common and preferred stock, we redeemed 35%, or approximately $159.4 million, of the aggregate
principal amount of the HLLC Senior Secured Notes on February 28, 2005 and paid a call premium of approximately $18.5 million. Following this partial redemption of the HLLC Senior
Secured Notes, there remain approximately $296.0 million in aggregate principal amount of the HLLC Senior Secured Notes outstanding.

The
indenture governing the HLLC Senior Secured Notes contains covenants relating to the incurrence of debt, limitations on distributions, asset sales and affiliate transactions, among
other things. The indenture also requires us to offer to repurchase the HLLC Senior Secured Notes upon a change of control. Management believes that we were in compliance with the covenants of the
HLLC Senior Secured Notes as of March 31, 2005.

15

---



Senior Unsecured Notes (HLLC Senior Notes)

On June 22, 2004, we sold $300 million of our senior unsecured fixed rate notes that bear interest at 11.5% and mature on July 15, 2012 (the
"HLLC Unsecured Fixed Rate Notes") and $100 million of our senior unsecured floating rate notes that bear interest at a rate equal to LIBOR plus 7.25% and mature on July 15, 2011 (the
"HLLC Unsecured Floating Rate Notes," and together with the HLLC Unsecured Fixed Rate Notes, the "HLLC Senior Notes"). The interest rate on the HLLC Unsecured Floating Rate Notes as of
March 31, 2005 was 9.91%, before additional interest as discussed below. Interest on the HLLC Unsecured Fixed Rate Notes is paid each January 15 and July 15 and is paid on the
HLLC Unsecured Floating Rate Notes on the 15th of January, April, July and October. The proceeds from the offering of the HLLC Senior Notes were used to repay $362.9 million on our prior term
loan B facility and $25 million to repay indebtedness at HCCA. See "Other Debt" below. The HLLC Senior Notes are our unsecured obligations and are guaranteed by the HLLC
Guarantors.

The
HLLC Unsecured Fixed Rate Notes are redeemable after July 15, 2008 at 105.75% of the principal amount thereof, declining ratably to par on and after July 15, 2010. The
HLLC Unsecured Floating
Rate Notes are redeemable after July 15, 2006 at 104.0% of the principal amount thereof, declining ratably to par on and after July 15, 2008. At any time prior to July 15, 2007,
we may redeem up to 40% of the aggregate principal amount of the HLLC Unsecured Fixed Rate Notes at a redemption price of 111.5% with proceeds of a qualified equity offering. At any time prior to
July 15, 2006, we may redeem up to 40% of the aggregate principal amount of the HLLC Unsecured Floating Rate Notes with the proceeds of a qualified equity offering at a redemption price equal
to the par value plus LIBOR plus 7.25%. As a result of Huntsman Corporation's initial public offering of common and preferred stock, we redeemed 34%, or approximately $102.0 million of combined
aggregate principal amount of the HLLC Unsecured Fixed Rate Notes on March 14 and March 17, 2005 with combined call premiums of approximately $11.7 million. Following this partial
redemption, there remain approximately $198.0 million in aggregate principal amount of the HLLC Unsecured Fixed Rate Notes outstanding.

The
indenture governing the HLLC Senior Notes contains covenants relating to the incurrence of debt and limitations on distributions, asset sales and affiliate transactions, among other
things. The indenture also requires us to offer to repurchase the HLLC Senior Notes upon a change of control. Management believes that we were in compliance with the covenants of the HLLC Senior Notes
as of March 31, 2005.

Under
the terms of a registration rights agreement among us, the HLLC Guarantors and the initial purchasers of the HLLC Senior Notes, we were required to file a registration statement
relating to an exchange offer for the HLLC Senior Notes on or before November 19, 2004 (the "Filing Date"). Under the terms of the registration rights agreement, because we did not file the
registration statement by the Filing Date, we are required to pay additional interest on the HLLC Senior Notes at a rate of 0.25% per year for the first 90 day period following the Filing Date,
and 0.50% per year for the second 90 day period following the Filing Date, which we were paying as of March 31, 2005. We have filed the registration statement with the SEC and the
registration statement was declared effective on May 5, 2005, and the additional interest was discontinued as of the preceding day.

Senior Subordinated Fixed And Floating Rate Notes (HLLC Notes)

Our 9.5% fixed and variable subordinated notes due 2007 (the "HLLC Notes") with an outstanding principal balance of $59.3 million as of March 31,
2005 are our unsecured subordinated obligations and are junior in right of payment to all of our existing and future secured or unsecured senior indebtedness and effectively junior to any of our
secured indebtedness to the extent that collateral secures such indebtedness. Interest is payable on the HLLC Notes semiannually on January 1 and July 1 at an annual rate of 9.5% on the
fixed rate notes and LIBOR plus 3.25% on the floating

16

---



rate
notes. The HLLC Notes are redeemable at our option after July 2002 at a price declining from 104.75% to 100% of par value as of July 1, 2005. The weighted average interest rate on
the floating rate notes was 6.04% and 5.19% as of March 31, 2005 and 2004, respectively. As a result of previously executed amendments to the indentures, virtually all the restrictive covenants
contained in the indentures have been eliminated.

Other Debt

Huntsman Specialty's subordinated note, in the aggregate principal amount of $75.0 million, accrued interest until April 15, 2002 at 7% per annum.
Pursuant to the note agreement, effective April 15, 2002, all accrued interest was added to the principal of the note for a total principal amount of $106.6 million. Such principal
balance will be payable in a single installment on April 15, 2008. Interest has been payable quarterly in cash, commencing July 15, 2002. For financial reporting purposes, the note was
initially recorded at its estimated fair value of $58.2 million, based on prevailing market rates as of the effective date. As of March 31, 2005 and December 31, 2004, the
unamortized discount on the note was $5.0 million and $5.4 million, respectively.

Huntsman
Corporation Australia Pty Ltd. ("HCA"), our indirect Australian subsidiary that holds its Australian surfactants assets, maintains credit facilities (the "HCA
Facilities"). As of March 31, 2005, borrowings under the HCA Facilities totaled A$57.5 million ($44.3 million), which include A$41.8 million ($32.2 million) on the
term loan facility and A$15.2 million ($11.7 million) on the revolving credit line. On August 31, 2004, HCA refinanced the previously existing debt facilities with an
A$30.0 million ($23.1 million) revolving credit line supported by a borrowing base of eligible accounts receivable and inventory and an A$44.0 million ($33.9 million) term
facility.

Huntsman
Chemical Company Australia Pty Ltd. ("HCCA") and certain Australian affiliates hold our Australian styrenics assets. On August 31, 2004, HCCA refinanced the
previously existing debt facilities of HCCA with an A$30.0 million ($23.1 million) revolving credit line supported by a borrowing base of
eligible accounts receivable (the "HCCA Facility"). As of March 31, 2005 borrowings under the HCCA Facility totaled A$22.2 million ($17.1 million).

The
HCA Facilities and the HCCA Facility are secured by a lien on substantially all their respective assets, bear interest at a rate of 2.9% above the Australian base rate, mature in
August 2007 and are non-recourse to us. As of March 31, 2005, the interest rate on the HCA Facilities and the HCCA Facility was 8.7%. On June 24, 2004, we used
$25 million of proceeds from the offering of the HLLC Senior Unsecured Notes to repay a portion of the previously existing debt facilities of HCCA. Management believes that HCA and HCCA are in
compliance with the covenants of the HCA Facilities and the HCCA Facility as of March 31, 2005.

On
July 2, 2001, we entered into a 15% note payable (the "Affiliate Note") with an affiliated entity in the amount of $25.0 million. Interest on the Affiliate Note was not
paid in cash, but accrued at a designated effective rate of 15% per annum, compounded annually. On February 16, 2005, the Affiliate Note was satisfied in full from proceeds of Huntsman
Corporation's initial public offering. As of December 31, 2004 and February 16, 2005, accrued interest added to the principal balance was $15.9 million and $16.6 million,
respectively.

As
of March 31, 2005, we had $3.4 million outstanding on short term notes payable for financing a portion of our insurance premiums. Such notes have monthly scheduled
amortization payments through the second quarter of 2005, bear interest at rates ranging from 3.65% to 4.0%, and are secured by unearned insurance premiums.

17

---



Scheduled Maturities

The scheduled maturities of debt by year are as follows (dollars in millions):

Year ending December 31:2005

$
14.12006


19.52007


121.92008


109.32009


69.1Later Years


1,271.7Total

$
1,605.6


In
connection with the repayment of indebtedness from the proceeds of Huntsman Corporation's initial public offering of common stock and preferred stock, we recorded a loss on early
extinguishment of debt in the first quarter of 2005 of $38.3 million.

12.   DERIVATIVE INSTRUMENTS AND HEDGING ACTIVITIES

We are exposed to market risks, such as changes in interest rates, foreign exchange rates and commodity pricing risks. From time to time, we enter into
transactions, including transactions involving derivative instruments, to manage interest rate exposure, but do not currently hedge for movements in commodities or foreign exchange rates. We manage
interest rate exposure through a program designed to reduce the impact of fluctuations in variable interest rates and to meet the requirements of certain credit agreements.

Interest Rate Hedging

Through our borrowing activities, we are exposed to interest rate risk. Such risk arises due to the structure of our debt portfolio, including the duration of the
portfolio and the mix of fixed and floating interest rates. Actions taken to reduce interest rate risk include managing the mix and rate characteristics of various interest bearing liabilities as well
as entering into interest rate swaps, collars and options.

As
of March 31, 2005 and 2004, we had entered into various types of interest rate contracts to manage our interest rate risk on our long-term debt as indicated below
(dollars in millions):

March 31, 2005

December 31, 2004Pay fixed swapsNotional amount

$
183.9

$
184.3Fair value


(1.3
)

(3.2
)Weighted average pay rate


4.44
%

4.44
%Maturing


2005 - 2007


2005 - 2007


We
purchase both interest rate swaps and interest rate collars to reduce the impact of changes in interest rates on our floating-rate long-term debt. Under
interest rate swaps, we agree with other parties to exchange, at specified intervals, the difference between fixed-rate and floating-rate interest amounts calculated by
reference to an agreed notional principal amount. The collars entitle us to receive from the counterparties (major banks) the amounts, if any, by which our interest payments on certain of our
floating-rate borrowings exceed a certain rate, and require us to pay to the counterparties (major banks) the amount, if any, by which our interest payments on certain of our
floating-rate borrowings are less than a certain rate.

18

---



Interest
rate contracts with a fair value loss of $1.3 million and $3.2 million were recorded as a component of other noncurrent liabilities as of March 31, 2005 and
December 31, 2004, respectively. The fair value of cash flow hedges and interest rate contracts not designated as hedges are $1.1 million and $0.2 million, respectively, as of
March 31, 2005 and $2.0 million and $1.2 million, respectively, as of December 31, 2004. The changes in the fair value of cash flow hedges resulted in no effect in interest
expense, a $0.5 million increase in interest expense and a $1.0 million increase and a $0.9 million decrease in other comprehensive income for the three months ended
March 31, 2005 and 2004, respectively. The changes in the fair value of interest rate contracts not designated as hedges resulted in a $1.0 million decrease in expense and a
$0.8 million increase in interest expense for the three months ended March 31, 2005 and 2004, respectively.

We
are exposed to credit losses in the event of nonperformance by a counterparty to the derivative financial instruments. We anticipate, however, that the counterparties will be able to
fully satisfy obligations under the contracts. Market risk arises from changes in interest rates.

13.   EMPLOYEE BENEFIT PLANS

Components of the net periodic benefit costs for the three months ended March 31, 2005 and 2004 were as follows (dollars in millions):

Defined Benefit Plans

Other Postretirement
Benefit PlansThree months ended
March 31,

Three months ended
March 31,2005

2004

2005

2004Service cost

$
6.1

$
3.8

$
0.7

$
0.6Interest cost


6.0


6.1


1.6


1.6Expected return on assets


(4.8
)

(4.3
)




Amortization of transition obligation


0.3


0.3





Amortization of prior service cost


(0.8
)

0.2


(0.5
)

(0.4
)Amortization of actuarial cost


1.2


0.9


0.9


0.8Net periodic benefit cost

$
8.0

$
7.0

$
2.7

$
2.6


14.   OTHER COMPREHENSIVE INCOME

Other comprehensive income consisted of the following (dollars in millions):

|                                                               |  | Accumulated income (loss) |       | Income (loss) |  
|-------------------------------------------------------------- |  | ------------------------- | ----- | ------------- | -
|
|
|Foreign currency translation adjustments                       |  | $                         | 19.4  |               | $
|Unrealized loss on nonqualified plan investments               |  |                           | 0.8   |               |  
|Unrealized loss on derivative instruments                      |  |                           | (4.2  | )             |  
|Minimum pension liability                                      |  |                           | (42.2 | )             |  
|Other comprehensive income of minority interest                |  |                           | (0.6  | )             |  
|Other comprehensive income (loss) of unconsolidated affiliates |  |                           | 83.5  |               |  
|                                                               |  |                           |       |               |  
|Total                                                          |  | $                         | 56.7  |               | $
|                                                               |  |                           |       |               |  

Items
of other comprehensive income have been recoded net of tax, with the exception of the foreign currency translation adjustments related to subsidiaries with earnings permanently
reinvested.

19

---



The
tax effect is determined based on the jurisdiction where the income or loss was recognized and is net of valuation allowances that have been recorded.

15.   COMMITMENTS AND CONTINGENCIES

Purchase Commitments

We have various purchase commitments extending through 2023 for materials and supplies entered into in the ordinary course of business. The purchase commitments
are contracts that require minimum volume purchases. Certain contracts allow for changes in minimum required purchase volumes in the event of a temporary or permanent shutdown of a facility. The
contractual purchase price for substantially all of these contracts require minimum payments, even if no volume is purchased. These contracts approximate $14 million annually through 2005,
decreasing to approximately $9 million after 2008. Historically, we have not made any minimum payments under our take or pay contracts.

Legal Matters

We are a party to various lawsuits brought by persons alleging personal injuries and/or property damage based upon alleged exposure to toxic air emissions. For
example, since June 2003, a number of lawsuits have been filed in state district court in Jefferson County, Texas against several local chemical plants
and refineries, including our subsidiary, Huntsman Petrochemical Corporation. Generally, these lawsuits allege that the refineries and chemical plants located in the vicinity of the plaintiffs' homes
discharged chemicals into the air that interfere with use and enjoyment of property and cause health problems and/or property damages. None of these lawsuits include the amount of damages being
sought. Because these cases are still in the initial stages, we do not have sufficient information at the present time to estimate the amount or range of reasonably possible loss. The following table
presents information about the number of claims asserting damages based upon alleged exposure to toxic air emissions for the period indicated. Claims include all claims for which service has been
received by us, and each such claim represents a plaintiff who is pursuing a claim against us.

Three months ended
March 31, 2005Claims filed during period

0Claims resolved during period

749Claims unresolved at end of period

135


We
believe that we have valid defenses to these claims and, to the extent that we are not able to otherwise reach an appropriate resolution of these claims, we intend to defend them vigorously.

In
addition, we have been named as a "premises defendant" in a number of asbestos exposure cases, typically a claim by a non-employee of exposure to asbestos while at a
facility. These cases typically involve multiple plaintiffs bringing actions against multiple defendants, and the complaint does not indicate which plaintiffs are making claims against which
defendants, where or how the alleged injuries occurred, or what injuries each plaintiff claims. These facts, which are central to any estimate of probable loss, can be learned only through discovery.

Where
the alleged exposure occurred prior to our ownership or operation of the relevant "premises," the prior owners and operators generally have contractually agreed to retain liability
for, and to indemnify us against, asbestos exposure claims. This indemnification is not subject to any time or dollar amount limitations. Upon service of a complaint in one of these cases, we tender
it to the prior owner or operator. None of the complaints in these cases state the amount of damages being sought. The prior owner or operator accepts responsibility for the conduct of the defense of
the cases and payment of any amounts due to the claimants. In our ten-year experience with tendering these cases, we have not made any payment with respect to any tendered asbestos cases.
We believe that the

20

---



prior
owners or operators have the intention and ability to continue to honor their indemnities, although we cannot assure you that they will continue to do so or that we will not be liable for these
cases if they do not.

The
following table presents for the period indicated certain information about cases for which service has been received that we have tendered to the prior owner or operator, all of
which have been accepted.

Three months ended
March 31, 2005Tendered during the period

19Resolved during the period

9Unresolved at end of the period

408


We
have never made any payments with respect to these cases. As of March 31, 2005, we had an accrued liability of $12.5 million relating to these cases and a corresponding
receivable of $12.5 million relating to our indemnity protection with respect to these cases. We cannot assure you that our liability will not exceed our accruals or that our liability
associated with these cases would not be material to our financial condition, results of operations or liquidity.

Certain
cases in which we are a "premises defendant" are not subject to indemnification by prior owners or operators. The following table presents for the period indicated certain
information about these cases. Cases include all cases for which service has been received by us.

Three months ended
March 31, 2005Filed during period

4Resolved during period

1Unresolved at end of period

32


We
paid gross settlement costs for asbestos exposure cases that are not subject to indemnification of approximately $5,000 during the three months ended March 31, 2005.

As
of March 31, 2005, we had accrued reserves of $1.2 million relating to these cases. We cannot assure you that our liability will not exceed our accruals or that our
liability associated with these cases would not be material to our financial condition, results of operations or liquidity.

We
are a party to various other proceedings instituted by private plaintiffs, governmental authorities and others arising under provisions of applicable laws, including various
environmental, products liability and other laws. Except as otherwise disclosed in this report, we do not believe that the outcome of any of these matters will have a material adverse effect on our
financial condition, results of operations or liquidity. See "Note 16Environmental, Health and Safety Matters" for a discussion of environmental proceedings.

16.   ENVIRONMENTAL, HEALTH AND SAFETY MATTERS

General

We are subject to extensive federal, state, local and foreign laws, regulations, rules and ordinances relating to pollution, protection of the environment and the
generation, storage, handling, transportation, treatment, disposal and remediation of hazardous substances and waste materials. In the ordinary course of business, we are subject to frequent
environmental inspections and monitoring and occasional investigations by governmental enforcement authorities. In addition, our production facilities require operating permits that are subject to
renewal, modification and, in certain circumstances, revocation. Actual or alleged violations of environmental laws or permit requirements could result in

21

---



restrictions
or prohibitions on plant operations, substantial civil or criminal sanctions, as well as, under some environmental laws, the assessment of strict liability and/or joint and several
liability. Moreover, changes in environmental regulations could inhibit or interrupt our operations, or require us to modify our facilities or operations. Accordingly, environmental or regulatory
matters may cause us to incur significant unanticipated losses, costs or liabilities.

Environmental, Health and Safety Systems

We are committed to achieving and maintaining compliance with all applicable environmental, health and safety ("EHS") legal requirements, and we have developed
policies and management systems that are intended to identify the multitude of EHS legal requirements applicable to our operations, enhance compliance with applicable legal requirements, ensure the
safety of our employees, contractors, community neighbors and customers and minimize the production and emission of wastes and other pollutants. Although EHS legal requirements are constantly changing
and are frequently difficult to comply with, these EHS management systems are designed to assist us in our compliance goals while also fostering efficiency and improvement and minimizing overall risk
to us.

EHS Capital Expenditures

We may incur future costs for capital improvements and general compliance under EHS laws, including costs to acquire, maintain and repair pollution control
equipment. For the three months ended March 31, 2005 and 2004, our capital expenditures for EHS matters totaled $2.6 million and $7.9 million, respectively. Since capital
expenditures for these matters are subject to evolving regulatory requirements and depend, in part, on the timing, promulgation and enforcement of specific requirements, we cannot provide assurance
that our recent expenditures will be indicative of future amounts required under EHS laws.

Governmental Enforcement Proceedings

On occasion, we receive notices of violation, enforcement and other complaints from regulatory agencies alleging non-compliance with applicable EHS
law. By way of example, we are aware of the individual matters set out below, which we believe to be the most significant presently pending matters and unasserted claims. Although we may incur costs
or penalties in connection with the governmental proceedings discussed below, based on currently available information and our past experience, we believe that the ultimate resolution of these matters
will not have a material impact on our results of operations, financial position or liquidity.

In
May 2003, the State of Texas settled an air enforcement case with us relating to our Port Arthur plant. Under the settlement, we are required to pay a civil penalty of
$7.5 million over more than four years, undertake environmental monitoring projects totaling about $1.5 million in costs, and pay $0.4 million in attorney's fees to the Texas
Attorney General. As of March 31, 2005, we have paid $1.9 million toward the penalty and $0.4 million for the attorney's fees. The monitoring projects are underway and on
schedule. We do not anticipate that this settlement will have a material adverse effect on our results of operations, financial position or liquidity.

In
the third quarter of 2004, our Jefferson County, Texas facilities received notification from the Texas Commission on Environmental Quality ("TCEQ") of potential air emission
violations relating to the operation of cooling towers at two of our plants, alleged nuisance odors, and alleged upset air emissions. TCEQ had proposed a penalty of $9,300 for the alleged nuisance
odor violations, but withdrew the allegations and the proposed penalty in a February 28, 2005 letter to Huntsman, thus resolving this issue. The TCEQ proposed $0.2 million for the
alleged upset violations and $0.1 million for the alleged cooling tower violations. Negotiations are anticipated between us and TCEQ with

22

---



respect
to the resolution of these two alleged violations. We do not believe that the final cost to resolve these matters will be material.

By
letter dated March 17, 2005, the TCEQ notified us that it intends to pursue an enforcement action as a result of various upset emission events occurring at our Port Arthur
facility between August 2003 and the end of 2004. TCEQ alleged that each upset event is a separate violation of its air emission rules and proposed a civil penalty of $77,137. In a similar
vein, the TCEQ issued a Notice of Enforcement to us on February 16, 2005 for alleged violations at our Port Neches plants arising out of upset emission events on various dates in 2004. TCEQ has
not yet proposed a penalty in this second matter, although we anticipate that it will. We will seek to negotiate a settlement with TCEQ on all of the alleged violations. We do not believe that the
resolution of these matters will result in the imposition of costs material to our results of operations, financial position or liquidity.

See
"Part II, Item 1Legal Proceedings" for a discussion of environmental lawsuits brought by private party plaintiffs.

Remediation Liabilities

We have incurred, and we may in the future incur, liability to investigate and clean up waste or contamination at our current or former facilities or facilities
operated by third parties at which we may have disposed of waste or other materials. Similarly, we may incur costs for the cleanup of wastes that were disposed of prior to the purchase of our
businesses. Under some circumstances, the scope of our liability may extend to damages to natural resources. Specifically, under the U.S. Comprehensive Environmental Response, Compensation and
Liability Act of 1980, as amended ("CERCLA"), and similar state laws, a current or former owner or operator of real property may be liable for remediation costs regardless of whether the release or
disposal of hazardous substances was in compliance with law at the time it occurred, and a current owner or operator may be liable regardless of whether it owned or operated the facility at the time
of the release. In addition, under the U.S. Resource Conservation and Recovery Act of 1976, as amended ("RCRA"), and similar state laws, we may be required to remediate contamination originating from
our properties as a condition to our hazardous waste permit. For example, our Odessa, Port Arthur, and Port Neches facilities in Texas are the subject of ongoing remediation requirements under RCRA
authority. In many cases, our potential liability arising from historical contamination is based on operations and other events occurring prior to our ownership of the relevant facility. In these
situations, we frequently obtained an indemnity agreement from the prior owner addressing remediation liabilities arising from pre-closing conditions. We have successfully exercised our
rights under these contractual covenants for a number of sites, and where applicable, mitigated our ultimate remediation liability. We cannot assure you, however, that all of such matters will be
subject to indemnity or that our existing indemnities will be sufficient to cover our liabilities for such matters.

We
have been notified by third parties of claims against us or our subsidiaries for cleanup liabilities at approximately 12 former facilities and other third party sites, including but
not limited to sites listed under CERCLA. Based on current information and past experience at other CERCLA sites, we do not expect any of these third-party claims to result in material liability to
us.

One
of these sites, the North Maybe Canyon CERCLA site, includes an abandoned phosphorous mine located in a U.S. National Forest in Idaho. The North Maybe Canyon mine may have been
operated by one of our predecessors for approximately two out of the eight years (1964 to 1972) during which it held mining leases in the area. In 2004, we received from the Forest Service a notice of
potential liability for the mine under CERCLA. According to information from the U.S. government, North Maybe Canyon was actively mined for a total of about 20 years. The current owner, NuWest
Industries, Inc., a subsidiary of Agrium, Inc., operated the mine for at least six of those years. Under an administrative order with the Forest Service and other governmental agencies,
NuWest is currently

23

---



undertaking
an investigation of the site, with a specific focus on the release of selenium-contaminated surface water into streams in the area. To date, no emergency removal action or other high
priority cleanup has been proposed. One of the previous operators of the site, Washington Group International, Inc., has been the subject of bankruptcy proceedings in which the U.S. Department
of Justice asserted a claim for investigation and remediation costs at North Maybe Canyon and South Maybe Canyon (which we did not own or operate), a similar nearby mine that also is currently under
investigation. The government claimed $15.7 million in investigation and remediation costs for South Maybe Canyon and $3.0 million in investigation costs for North Maybe Canyon. The
government stated that cleanup costs at North Maybe Canyon had not yet been estimated. We do not currently have sufficient information to estimate actual remediation costs or our actual liability, if
any, for investigation and cleanup of the North Maybe Canyon site.

Environmental Reserves

We have established financial reserves relating to anticipated environmental cleanup obligations, site reclamation and closure costs and known penalties.
Liabilities are recorded when potential liabilities are either known or considered probable and can be reasonably estimated. Our liability estimates are based upon available facts, existing technology
and past experience. On a consolidated basis, we have accrued approximately $14 million for environmental liabilities as of each of March 31, 2005 and December 31, 2004. Of these
amounts, approximately $2 million are classified as accrued liabilities on our consolidated balance sheets as of each of March 31, 2005 and December 31, 2004, and approximately
$12 million are classified as other noncurrent liabilities on our consolidated balance sheets as of each of March 31, 2005 and December 31, 2004. In certain cases, our remediation
liabilities are payable over periods of up to 30 years. We may incur losses for environmental remediation in excess of the amounts accrued; however, we are not able to estimate the amount or
range of such losses.

Regulatory Developments

Under the European Union ("EU") Integrated Pollution Prevention and Control Directive ("IPPC"), EU member governments are to adopt rules and implement a
cross-media (air, water and waste) environmental permitting program for individual facilities. While the EU countries are at varying stages
in their respective implementation of the IPPC permit program, we have submitted all necessary IPPC permit applications required to date, and in some cases received completed permits from the
applicable government agency. We expect to submit all other IPPC applications and related documents on a timely basis as the various countries implement the IPPC permit program. Although we do not
know with certainty what each IPPC permit will require, we believe, based upon our experience with the permits received to date, that the costs of compliance with the IPPC permit program will not be
material to our results of operations, financial position or liquidity.

In
October 2003, the European Commission adopted a proposal for a new EU regulatory framework for chemicals. Under this proposed new system called "REACH" (Registration,
Evaluation and Authorization of Chemicals), companies that manufacture or import more than one ton of a chemical substance per year would be required to register such manufacture or import in a
central database. The REACH initiative, as proposed, would require risk assessment of chemicals, preparations (e.g., soaps and paints) and articles (e.g., consumer products) before those materials
could be manufactured or imported into EU countries. Where warranted by a risk assessment, hazardous substances would require authorizations for their use. This regulation could impose risk control
strategies that would require capital expenditures by us. As proposed, REACH would take effect in three primary stages over the eleven years following the final effective date (assuming final
approval). The impacts of REACH on the chemical industry and on us are unclear at this time because the parameters of the program are still being actively debated.

24

---



MTBE Developments

The use of MTBE is controversial in the U.S. and elsewhere and may be substantially curtailed or eliminated in the future by legislation or regulatory action. The
presence of MTBE in some groundwater supplies in California and other states (primarily due to gasoline leaking from underground storage tanks) and in surface water (primarily from recreational
watercraft) has led to public concern about MTBE's potential to contaminate drinking water supplies. Heightened public awareness regarding this issue has resulted in state, federal and foreign
initiatives to rescind the federal oxygenate requirements for reformulated gasoline or restrict or prohibit the use of MTBE in particular. For example, California, New York and Connecticut have
adopted rules that prohibit the use of MTBE in gasoline sold in those states as of January 1, 2004. Overall, states that have taken some action to prohibit or restrict the use of MTBE in
gasoline account for a substantial portion of the "pre-ban" U.S. MTBE market. Thus far, attempts by others to challenge these state bans in federal court under the reformulated gasoline
provisions of the federal Clean Air Act have been unsuccessful.

The
U.S. Congress has been considering legislation that would eliminate the oxygenated fuels requirements in the Clean Air Act and phase out or curtail MTBE use over a period of years.
To date, no such legislation has become law. If it were to become law it could result in a federal
phase-out of the use of MTBE in gasoline in the U.S., but it would not prevent us from manufacturing MTBE in our plants. In addition, in March 2000, the EPA announced its intention,
through an advanced notice of proposed rulemaking, to phase out the use of MTBE under authority of the federal Toxic Substances Control Act. EPA has not yet acted on this proposal, however. In Europe,
the EU issued a final risk assessment report on MTBE in September 2002. No ban of MTBE was recommended, though several risk reduction measures relating to storage and handling of
MTBE-containing fuel were recommended.

We
currently market approximately 95% of our MTBE to customers located in the U.S. for use as a gasoline additive. Any phase-out or other future regulation of MTBE in other
jurisdictions, nationally or internationally, may result in a significant reduction in demand for our MTBE and in a material loss in revenues or material costs or expenditures. In the event that there
should be a complete phase-out of MTBE in the U.S., we believe we will be able to export MTBE to Europe, Asia or South America, although this may produce a lower level of cash flow than
the sale of MTBE in the U.S. We may also elect to use all or a portion of our precursor TBA to produce saleable products other than MTBE. If we opt to produce products other than MTBE, necessary
modifications to our facilities may require significant capital expenditures and the sale of the other products may produce a materially lower level of cash flow than the sale of MTBE.

In
addition to the use limitations described above, a number of lawsuits have been filed, primarily against gasoline manufacturers, marketers and distributors, by persons seeking to
recover damages allegedly arising from the presence of MTBE in groundwater. While we have not been named as a defendant in any litigation concerning the environmental effects of MTBE, we cannot
provide assurances that we will not be involved in any such litigation or that such litigation will not have a material adverse effect on our results of operations, financial position or liquidity.

17.   OTHER EXPENSE

Other expense consisted of the following (dollars in millions):

For three months ended
March 31,2005

2004Loss on early extinguishment of debt

$
(38.3
)
$
(1.9
)Other, net


(0.2
)

0.3Total other expense

$
(38.5
)
$
(1.6
)


25

---



18.   INCOME TAXES

Income tax benefit was $0.8 million for the three months ended March 31, 2005 and $2.4 million for the three months ended March 31,
2004. We use the asset and liability method of accounting for income taxes. Deferred income taxes reflect the net tax effects of temporary differences between the carrying amounts of assets and
liabilities for financial and tax reporting purposes. We evaluate the resulting deferred tax assets to determine whether it is more likely than not that they will be realized. Valuation allowances
have been established against the entire domestic and certain of the non-U.S. deferred tax assets due to the uncertainty of realization. Valuation allowances are reviewed each period on a
tax jurisdiction-by-jurisdiction basis to analyze whether a change in circumstances has occurred to provide enough positive or negative evidence to support a change in judgment about the realizability
of the related deferred tax asset.

19.   OPERATING SEGMENT INFORMATION

We derive our revenues, earnings and cash flows from the manufacture and sale of a wide variety of differentiated and commodity chemical products. We have three
reportable operating segments: Performance Products, Polymers and Base Chemicals.

The
major products of each reportable operating segment are as follows:

|Segment              |  | Products                                                                                                                                                       
|-------------------- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------
|Performance Products |  | Amines, surfactants, linear alkylbenzene, maleic anhydride, other performance chemicals, glycols and technology licenses                                       
|Polymers             |  | Ethylene (produced at the Odessa, Texas facilities primarily for internal use), polyethylene, polypropylene, expandable polystyrene, styrene and other polymers
|Base Chemicals       |  | Olefins (primarily ethylene and propylene), butadiene, MTBE, benzene, cyclohexane and paraxylene                                                               

26

---



Sales
between segments are generally recognized at external market prices (dollars in millions).

Three months endedMarch 31,
2005

March 31,
2004Revenues:Performance Products

$
338.2

$
301.5Polymers


413.6


314.5Base Chemicals


540.8


385.3Eliminations


(88.1
)

(61.6
)Total

$
1,204.5

$
939.7Segment EBITDA(1)Performance Products

$
66.7

$
33.5Polymers


44.9


18.9Base Chemicals


59.4


21.9Corporate and other(2)


(27.5
)

(52.3
)Total

$
143.5

$
22.0Segment EBITDA(1)

$
143.5

$
22.0Interest expense, net


(40.7
)

(46.8
)Income tax benefit


0.8


2.4Depreciation and amortization


(31.0
)

(32.6
)Net income (loss)

$
72.6

$
(55.0
)


---

20.   CONDENSED CONSOLIDATING FINANCIAL STATEMENTS

The following are condensed consolidating financial statements which present, in separate columns: our investments in subsidiaries using the equity method; the
Guarantors on a combined, or where appropriate, consolidated basis, carrying its investments in the Non-Guarantors under the equity method; and the Non-Guarantors on a
consolidated basis. Additional columns present eliminating adjustments and consolidated totals as of March 31, 2005 and 2004 and for the three months ended March 31, 2005 and the year
ended December 31, 2004. There are no restrictions limiting transfers of cash from guarantor to non-guarantor subsidiaries to us. The combined Guarantors are our wholly-owned
subsidiaries and have fully and unconditionally guaranteed $296.0 million of the 2003 Secured Notes on a joint and several basis. We have not presented separate financial statements and other
disclosures concerning the combined Guarantors because management has determined that such information is not material to investors.

27

---





HUNTSMAN LLC AND SUBSIDIARIES        CONDENSED CONSOLIDATING BALANCE SHEETS        AS OF MARCH 31, 2005 (Unaudited)        (Dollars in Millions)

|                                               |                                      | Parent
Company                                  |                                 | Guarantors |         | Non-
guarantors |        | Eliminations |         | Consolidated
Huntsman LLC |      
|---------------------------------------------- | ------------------------------------ | ----------------------------------------------- | ------------------------------- | ---------- | ------- | --------------- | ------ | ------------ | ------- | ------------------------- | -----
|ASSETS                                         |                                      |                                                 |                                 |            |         |                 |        |              |         |                           |      
|Current assets:                                |                                      |                                                 |                                 |            |         |                 |        |              |         |                           |      
|                                               | Cash and cash equivalents            |                                                 | $                               | 1.1        |         | $               | 3.2    |              | $       | 14.7                      |      
|                                               | Restricted cash                      |                                                 |                                 | 0.3        |         |                 | 9.0    |              |         |                          |      
|                                               | Receivablesnet                      |                                                 |                                 | 222.7      |         |                 | 753.9  |              |         | 87.0                      |      
|                                               | Inventories                          |                                                 |                                 | 51.1       |         |                 | 240.0  |              |         | 78.3                      |      
|                                               | Prepaid expenses                     |                                                 |                                 | 0.8        |         |                 | 15.7   |              |         | 1.3                       |      
|                                               | Deferred income tax                  |                                                 |                                 |           |         |                 |       |              |         | 0.7                       |      
|                                               | Other current assets                 |                                                 |                                 | 4.5        |         |                 | 6.7    |              |         | 13.0                      |      
|                                               |                                      |                                                 |                                 |            |         |                 |        |              |         |                           |      
|                                               |                                      | Total current assets                            |                                 |            | 280.5   |                 |        | 1,028.5      |         |                           | 195.0
|Property, plant and equipment, net             |                                      |                                                 | 106.1                           |            |         | 1,012.0         |        |              | 109.8   |                           |      
|Investment in unconsolidated affiliates        |                                      |                                                 | (621.4                          | )          |         | 413.1           |        |              | 31.8    |                           |      
|Intangible assets, net                         |                                      |                                                 | 1.9                             |            |         | 10.8            |        |              | 19.4    |                           |      
|Goodwill                                       |                                      |                                                 |                                |            |         |                |        |              | 6.4     |                           |      
|Deferred income tax                            |                                      |                                                 | 0.4                             |            |         | 7.9             |        |              |        |                           |      
|Other noncurrent assets                        |                                      |                                                 | 2,238.5                         |            |         | 215.9           |        |              | 25.5    |                           |      
|                                               |                                      |                                                 |                                 |            |         |                 |        |              |         |                           |      
|                                               |                                      | Total assets                                    |                                 | $          | 2,006.0 |                 | $      | 2,688.2      |         | $                         | 387.9
|                                               |                                      |                                                 |                                 |            |         |                 |        |              |         |                           |      
|LIABILITIES AND MEMBER'S EQUITY (DEFICIT)      |                                      |                                                 |                                 |            |         |                 |        |              |         |                           |      
|Current liabilities:                           |                                      |                                                 |                                 |            |         |                 |        |              |         |                           |      
|                                               | Trade accounts payable               |                                                 | $                               | 43.8       |         | $               | 275.9  |              | $       | 58.4                      |      
|                                               | Accounts payable-affiliates          |                                                 |                                 | 155.3      |         |                 | 266.9  |              |         | 34.4                      |      
|                                               | Accrued liabilities                  |                                                 |                                 | 83.2       |         |                 | 115.2  |              |         | 40.3                      |      
|                                               | Deferred income tax                  |                                                 |                                 | 0.4        |         |                 | 7.8    |              |         |                          |      
|                                               | Current portion of long-term debt    |                                                 |                                 | 10.6       |         |                 | 1.2    |              |         | 3.4                       |      
|                                               |                                      |                                                 |                                 |            |         |                 |        |              |         |                           |      
|                                               |                                      | Total current liabilities                       |                                 |            | 293.3   |                 |        | 667.0        |         |                           | 136.5
|Long-term debt                                 |                                      |                                                 | 1,419.7                         |            |         | 2,270.3         |        |              | 201.9   |                           |      
|Deferred income taxes                          |                                      |                                                 |                                |            |         |                |        |              | 1.0     |                           |      
|Other noncurrent liabilities                   |                                      |                                                 | 94.6                            |            |         | 170.1           |        |              | 7.7     |                           |      
|                                               |                                      |                                                 |                                 |            |         |                 |        |              |         |                           |      
|                                               |                                      |                                                 | Total liabilities               |            |         | 1,807.6         |        |              | 3,107.4 |                           |      
|                                               |                                      |                                                 |                                 |            |         |                 |        |              |         |                           |      
|Minority interest in unconsolidated subsidiary |                                      |                                                 |                                |            |         | 82.2            |        |              |        |                           |      
|Member's equity (deficit):                     |                                      |                                                 |                                 |            |         |                 |        |              |         |                           |      
|                                               | Member's equity                      |                                                 |                                 | 1,428.4    |         |                 | 214.4  |              |         | 65.3                      |      
|                                               | Subsidiary preferred stock           |                                                 |                                 |           |         |                 | 73.4   |              |         | 1.4                       |      
|                                               | Subsidiary common stock              |                                                 |                                 |           |         |                 | 56.4   |              |         | 38.5                      |      
|                                               | Accumulated deficit                  |                                                 |                                 | (1,286.7   | )       |                 | (927.8 | )            |         | (47.5                     | )    
|                                               | Accumulated other comprehensive loss |                                                 |                                 | 56.7       |         |                 | 82.2   |              |         | (16.9                     | )    
|                                               |                                      |                                                 |                                 |            |         |                 |        |              |         |                           |      
|                                               |                                      |                                                 | Total member's equity (deficit) |            |         | 198.4           |        |              | (501.4  | )                         |      
|                                               |                                      |                                                 |                                 |            |         |                 |        |              |         |                           |      
|                                               |                                      | Total liabilities and member's equity (deficit) |                                 | $          | 2,006.0 |                 | $      | 2,688.2      |         | $                         | 387.9
|                                               |                                      |                                                 |                                 |            |         |                 |        |              |         |                           |      

28

---



HUNTSMAN LLC AND SUBSIDIARIES        CONDENSED CONSOLIDATING BALANCE SHEETS        AS OF DECEMBER 31, 2004        (Dollars in Millions)

|                                               |                                      | Parent
Company                                  |                                 | Guarantors |         | Non-
guarantors |          | Eliminations |         | Consolidated
Huntsman LLC |      
|---------------------------------------------- | ------------------------------------ | ----------------------------------------------- | ------------------------------- | ---------- | ------- | --------------- | -------- | ------------ | ------- | ------------------------- | -----
|ASSETS                                         |                                      |                                                 |                                 |            |         |                 |          |              |         |                           |      
|Current assets:                                |                                      |                                                 |                                 |            |         |                 |          |              |         |                           |      
|                                               | Cash and cash equivalents            |                                                 | $                               | (0.1       | )       | $               | 3.5      |              | $       | 8.3                       |      
|                                               | Restricted cash                      |                                                 |                                 | 0.3        |         |                 | 8.6      |              |         |                          |      
|                                               | Receivablesnet                      |                                                 |                                 | 72.4       |         |                 | 451.7    |              |         | 92.5                      |      
|                                               | Inventories                          |                                                 |                                 | 41.1       |         |                 | 218.9    |              |         | 78.8                      |      
|                                               | Prepaid expenses                     |                                                 |                                 | 1.5        |         |                 | 27.3     |              |         | 1.2                       |      
|                                               | Deferred income tax                  |                                                 |                                 |           |         |                 |         |              |         | 0.7                       |      
|                                               | Other current assets                 |                                                 |                                 | 4.6        |         |                 | 6.7      |              |         | 3.9                       |      
|                                               |                                      |                                                 |                                 |            |         |                 |          |              |         |                           |      
|                                               |                                      | Total current assets                            |                                 |            | 119.8   |                 |          | 716.7        |         |                           | 185.4
|Property, plant and equipment, net             |                                      |                                                 | 98.6                            |            |         | 1,025.8         |          |              | 107.7   |                           |      
|Investment in unconsolidated affiliates        |                                      |                                                 | (685.5                          | )          |         | 400.9           |          |              | 43.0    |                           |      
|Intangible assets, net                         |                                      |                                                 | 2.0                             |            |         | 8.0             |          |              | 26.5    |                           |      
|Goodwill                                       |                                      |                                                 |                                |            |         | 3.3             |          |              |        |                           |      
|Deferred income tax                            |                                      |                                                 | 0.4                             |            |         | 7.8             |          |              |        |                           |      
|Other noncurrent assets                        |                                      |                                                 | 2,259.0                         |            |         | 195.0           |          |              | 36.2    |                           |      
|                                               |                                      |                                                 |                                 |            |         |                 |          |              |         |                           |      
|                                               |                                      | Total assets                                    |                                 | $          | 1,794.3 |                 | $        | 2,357.5      |         | $                         | 398.8
|                                               |                                      |                                                 |                                 |            |         |                 |          |              |         |                           |      
|LIABILITIES AND MEMBER'S EQUITY (DEFICIT)      |                                      |                                                 |                                 |            |         |                 |          |              |         |                           |      
|Current liabilities:                           |                                      |                                                 |                                 |            |         |                 |          |              |         |                           |      
|                                               | Accounts payable                     |                                                 | $                               | (22.2      | )       | $               | 266.6    |              | $       | 93.7                      |      
|                                               | Accrued liabilities                  |                                                 |                                 | 97.4       |         |                 | 139.8    |              |         | 31.9                      |      
|                                               | Deferred income tax                  |                                                 |                                 | 0.4        |         |                 | 7.8      |              |         |                          |      
|                                               | Current portion of long-term debt    |                                                 |                                 | 20.7       |         |                 | 1.2      |              |         | 3.4                       |      
|                                               |                                      |                                                 |                                 |            |         |                 |          |              |         |                           |      
|                                               |                                      | Total current liabilities                       |                                 |            | 96.3    |                 |          | 415.4        |         |                           | 129.0
|Long-term debt                                 |                                      |                                                 | 1,784.1                         |            |         | 2,259.8         |          |              | 206.2   |                           |      
|Deferred income taxes                          |                                      |                                                 | (0.4                            | )          |         |                |          |              | 1.4     |                           |      
|Other noncurrent liabilities                   |                                      |                                                 | 95.0                            |            |         | 170.4           |          |              | 7.1     |                           |      
|                                               |                                      |                                                 |                                 |            |         |                 |          |              |         |                           |      
|                                               |                                      |                                                 | Total liabilities               |            |         | 1,975.0         |          |              | 2,845.6 |                           |      
|                                               |                                      |                                                 |                                 |            |         |                 |          |              |         |                           |      
|Minority interest in consolidated subsidiaries |                                      |                                                 |                                |            |         | 65.8            |          |              |        |                           |      
|                                               |                                      |                                                 |                                 |            |         |                 |          |              |         |                           |      
|Member's (deficit) equity:                     |                                      |                                                 |                                 |            |         |                 |          |              |         |                           |      
|                                               | Member's equity                      |                                                 |                                 | 1,095.2    |         |                 |         |              |         |                          |      
|                                               | Subsidiary preferred stock           |                                                 |                                 |           |         |                 | 70.6     |              |         | 1.4                       |      
|                                               | Subsidiary common stock              |                                                 |                                 |           |         |                 | 56.4     |              |         | 77.2                      |      
|                                               | Additional paid in capital           |                                                 |                                 |           |         |                 | 214.4    |              |         | 39.1                      |      
|                                               | Accumulated deficit                  |                                                 |                                 | (1,359.3   | )       |                 | (1,004.3 | )            |         | (46.4                     | )    
|                                               | Accumulated other comprehensive loss |                                                 |                                 | 83.4       |         |                 | 109.0    |              |         | (16.2                     | )    
|                                               |                                      |                                                 |                                 |            |         |                 |          |              |         |                           |      
|                                               |                                      |                                                 | Total member's (deficit) equity |            |         | (180.7          | )        |              | (553.9  | )                         |      
|                                               |                                      |                                                 |                                 |            |         |                 |          |              |         |                           |      
|                                               |                                      | Total liabilities and member's (deficit) equity |                                 | $          | 1,794.3 |                 | $        | 2,357.5      |         | $                         | 398.8
|                                               |                                      |                                                 |                                 |            |         |                 |          |              |         |                           |      

29

---





HUNTSMAN LLC AND SUBSIDIARIES        CONSOLIDATING STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME (LOSS)        FOR THE THREE MONTHS ENDED MARCH 31, 2005 (Unaudited)    
(Dollars in Millions)

|                                                                             |                                | Parent
Company |       | Guarantors |   | Non-guarantors |       | Eliminations |       | Consolidated
Huntsman LLC |  
|---------------------------------------------------------------------------- | ------------------------------ | -------------- | ----- | ---------- | - | -------------- | ----- | ------------ | ----- | ------------------------- | -
|Revenues:                                                                    |                                |                |       |            |   |                |       |              |       |                           |  
|                                                                             | Trade sales                    |                | $     | 122.8      |   | $              | 908.2 |              | $     | 97.1                      |  
|                                                                             | Related party sales            |                |       |           |   |                | 76.3  |              |       | 19.3                      |  
|                                                                             | Expense billed to subsidiaries |                |       | 9.8        |   |                | (9.3  | )            |       | (0.5                      | )
|                                                                             |                                |                |       |            |   |                |       |              |       |                           |  
|Total Revenues                                                               |                                |                | 132.6 |            |   | 975.2          |       |              | 115.9 |                           |  
|Cost of goods sold                                                           |                                |                | 109.4 |            |   | 844.8          |       |              | 107.9 |                           |  
|                                                                             |                                |                |       |            |   |                |       |              |       |                           |  
|Gross Profit                                                                 |                                |                | 23.2  |            |   | 130.4          |       |              | 8.0   |                           |  
|Selling, general and administrative                                          |                                |                | 11.8  |            |   | 21.1           |       |              | 5.8   |                           |  
|Research and development                                                     |                                |                |      |            |   | 4.5            |       |              | 0.6   |                           |  
|Other operating income                                                       |                                |                | (0.5  | )          |   | (1.5           | )     |              | 0.3   |                           |  
|Restructuring and plant closing costs                                        |                                |                |      |            |   | 3.3            |       |              | 0.1   |                           |  
|                                                                             |                                |                |       |            |   |                |       |              |       |                           |  
|Operating income                                                             |                                |                | 11.9  |            |   | 103.0          |       |              | 1.2   |                           |  
|Interest income (expense), net                                               |                                |                | 8.9   |            |   | (45.7          | )     |              | (3.9  | )                         |  
|Equity in income of investment in unconsolidated affiliates and subsidiaries |                                |                | 89.6  |            |   | 39.1           |       |              | 2.3   |                           |  
|Other expense                                                                |                                |                | (38.1 | )          |   |               |       |              | (0.4  | )                         |  
|                                                                             |                                |                |       |            |   |                |       |              |       |                           |  
|Income (loss) before income taxes, minority interest                         |                                |                | 72.3  |            |   | 96.4           |       |              | (0.8  | )                         |  
|Income tax benefit (expense)                                                 |                                |                | 0.3   |            |   | (0.1           | )     |              | 0.6   |                           |  
|                                                                             |                                |                |       |            |   |                |       |              |       |                           |  
|Income (loss) before minority interest                                       |                                |                | 72.6  |            |   | 96.3           |       |              | (0.2  | )                         |  
|Minority interest in subsidiaries' loss                                      |                                |                |      |            |   | (16.6          | )     |              |      |                           |  
|                                                                             |                                |                |       |            |   |                |       |              |       |                           |  
|Net income (loss)                                                            |                                |                | 72.6  |            |   | 79.7           |       |              | (0.2  | )                         |  
|Other comprehensive loss                                                     |                                |                | (26.7 | )          |   | (26.8          | )     |              | (0.7  | )                         |  
|                                                                             |                                |                |       |            |   |                |       |              |       |                           |  
|Comprehensive income (loss)                                                  |                                | $              | 45.9  |            | $ | 52.9           |       | $            | (0.9  | )                         | $
|                                                                             |                                |                |       |            |   |                |       |              |       |                           |  

30

---



HUNTSMAN LLC AND SUBSIDIARIES        CONSOLIDATING STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS        FOR THE THREE MONTHS ENDED MARCH 31, 2004 (Unaudited)        (Dollars in
Millions)

|                                                                                      |                                | Parent
Company |       | Guarantors |   | Non-guarantors |       | Eliminations |      | Consolidated
Huntsman LLC |  
|------------------------------------------------------------------------------------- | ------------------------------ | -------------- | ----- | ---------- | - | -------------- | ----- | ------------ | ---- | ------------------------- | -
|Revenues:                                                                             |                                |                |       |            |   |                |       |              |      |                           |  
|                                                                                      | Trade sales                    |                | $     | 88.1       |   | $              | 704.4 |              | $    | 93.6                      |  
|                                                                                      | Related party sales            |                |       |           |   |                | 54.7  |              |      | 0.9                       |  
|                                                                                      | Expense billed to subsidiaries |                |       | 6.7        |   |                | (6.4  | )            |      | (0.3                      | )
|                                                                                      |                                |                |       |            |   |                |       |              |      |                           |  
|Total Revenues                                                                        |                                |                | 94.8  |            |   | 752.7          |       |              | 94.2 |                           |  
|Cost of goods sold                                                                    |                                |                | 80.1  |            |   | 705.8          |       |              | 86.7 |                           |  
|                                                                                      |                                |                |       |            |   |                |       |              |      |                           |  
|Gross Profit                                                                          |                                |                | 14.7  |            |   | 46.9           |       |              | 7.5  |                           |  
|Selling, general and administrative                                                   |                                |                | 8.7   |            |   | 20.5           |       |              | 5.7  |                           |  
|Research and development                                                              |                                |                |      |            |   | 4.6            |       |              | 1.0  |                           |  
|Other operating income                                                                |                                |                | (0.1  | )          |   | (1.8           | )     |              | 0.5  |                           |  
|                                                                                      |                                |                |       |            |   |                |       |              |      |                           |  
|Operating income                                                                      |                                |                | 6.1   |            |   | 23.6           |       |              | 0.3  |                           |  
|Interest expense, net                                                                 |                                |                | (0.6  | )          |   | (42.8          | )     |              | (3.4 | )                         |  
|Equity in (losses) income of investment in unconsolidated affiliates and subsidiaries |                                |                | (60.9 | )          |   | (38.4          | )     |              | 0.7  |                           |  
|Other (expense) income                                                                |                                |                | (1.8  | )          |   |               |       |              | 0.2  |                           |  
|                                                                                      |                                |                |       |            |   |                |       |              |      |                           |  
|Loss before income taxes, minority interest                                           |                                |                | (57.2 | )          |   | (57.6          | )     |              | (2.2 | )                         |  
|Income tax benefit                                                                    |                                |                | 2.2   |            |   |               |       |              | 0.2  |                           |  
|                                                                                      |                                |                |       |            |   |                |       |              |      |                           |  
|Loss before minority interest                                                         |                                |                | (55.0 | )          |   | (57.6          | )     |              | (2.0 | )                         |  
|Minority interest in subsidiaries' loss                                               |                                |                |      |            |   | 0.8            |       |              |     |                           |  
|                                                                                      |                                |                |       |            |   |                |       |              |      |                           |  
|Net loss                                                                              |                                |                | (55.0 | )          |   | (56.8          | )     |              | (2.0 | )                         |  
|Other comprehensive income (loss)                                                     |                                |                | 1.4   |            |   | 0.9            |       |              | (0.9 | )                         |  
|                                                                                      |                                |                |       |            |   |                |       |              |      |                           |  
|Comprehensive loss                                                                    |                                | $              | (53.6 | )          | $ | (55.9          | )     | $            | (2.9 | )                         | $
|                                                                                      |                                |                |       |            |   |                |       |              |      |                           |  

31

---





HUNTSMAN LLC AND SUBSIDIARIES        CONDENSED CONSOLIDATING STATEMENTS OF CASH FLOWS        FOR THE THREE MONTHS ENDED MARCH 31, 2005 (Unaudited)        (Dollars in Millions)

|                                                                         |                                                             | Parent
Company                 |        | Guarantors |       | Non-
Guarantors |       | Eliminations |      | Consolidated
Huntsman LLC |      
|------------------------------------------------------------------------ | ----------------------------------------------------------- | ------------------------------ | ------ | ---------- | ----- | --------------- | ----- | ------------ | ---- | ------------------------- | -----
|Cash flows from operating activities:                                    |                                                             |                                |        |            |       |                 |       |              |      |                           |      
|Net income (loss)                                                        |                                                             | $                              | 72.6   |            | $     | 79.7            |       | $            | (0.2 | )                         | $    
|Adjustments to reconcile net loss to net cash from operating activities: |                                                             |                                |        |            |       |                 |       |              |      |                           |      
|                                                                         | Equity in income of investment in unconsolidated affiliates |                                |        | (89.6      | )     |                 | (39.1 | )            |      | (2.3                      | )    
|                                                                         | Minority interest in subsidiaries                           |                                |        |           |       |                 | 16.6  |              |      |                          |      
|                                                                         | Depreciation and amortization                               |                                |        | 3.5        |       |                 | 23.4  |              |      | 4.1                       |      
|                                                                         | Provision (recovery of) for losses on accounts receivable   |                                |        |           |       |                 | 1.2   |              |      |                          |      
|                                                                         | Loss on disposal of assets                                  |                                |        |           |       |                 | 0.8   |              |      |                          |      
|                                                                         | Loss on early extingishment of debt                         |                                |        | 38.3       |       |                 |      |              |      |                          |      
|                                                                         | Non-cash interest expense                                   |                                |        | (45.7      | )     |                 | 44.0  |              |      | 2.6                       |      
|                                                                         | Non-cash interest on affiliate debt                         |                                |        |            |       |                 |       |              |      |                           |      
|                                                                         | Deferred income taxes                                       |                                |        |           |       |                 |      |              |      | (0.1                      | )    
|                                                                         | Net changes in operating assets and liabilities:            |                                |        |            |       |                 |       |              |      |                           |      
|                                                                         |                                                             | Accounts and notes receivables |        |            | 120.3 |                 |       | (139.8       | )    |                           | 21.5 
|                                                                         |                                                             | Inventories                    |        |            | (10.0 | )               |       | (21.1        | )    |                           | (0.4 
|                                                                         |                                                             | Prepaid expenses               |        |            | 0.8   |                 |       | 11.7         |      |                           | (0.1 
|                                                                         |                                                             | Other current assets           |        |            |      |                 |       |             |      |                           | (0.5 
|                                                                         |                                                             | Other noncurrent assets        |        |            | (0.8  | )               |       | 0.9          |      |                           | 2.3  
|                                                                         |                                                             | Accounts payable               |        |            | 8.9   |                 |       | 53.1         |      |                           | (21.1
|                                                                         |                                                             | Accrued liabilities            |        |            | (14.1 | )               |       | (24.0        | )    |                           |     
|                                                                         |                                                             | Other noncurrent liabilities   |        |            | 1.9   |                 |       | 0.8          |      |                           | 0.1  
|                                                                         |                                                             |                                |        |            |       |                 |       |              |      |                           |      
|Net cash provided by operating activities                                |                                                             |                                | 86.1   |            |       | 8.2             |       |              | 5.9  |                           |      
|                                                                         |                                                             |                                |        |            |       |                 |       |              |      |                           |      
|Investing activities:                                                    |                                                             |                                |        |            |       |                 |       |              |      |                           |      
|Capital expenditures for plant and equipment                             |                                                             |                                | (10.7  | )          |       | (7.8            | )     |              | (2.2 | )                         |      
|Change in restricted cash                                                |                                                             |                                |       |            |       | (0.4            | )     |              |     |                           |      
|                                                                         |                                                             |                                |        |            |       |                 |       |              |      |                           |      
|Net cash used in investing activities                                    |                                                             |                                | (10.7  | )          |       | (8.2            | )     |              | (2.2 | )                         |      
|                                                                         |                                                             |                                |        |            |       |                 |       |              |      |                           |      
|Financing activities:                                                    |                                                             |                                |        |            |       |                 |       |              |      |                           |      
|Net (repayment) borrowings on revolving loan facilities                  |                                                             |                                | (63.6  | )          |       |                |       |              | 2.8  |                           |      
|Repayment of long-term debt                                              |                                                             |                                | (311.7 | )          |       | (0.3            | )     |              |     |                           |      
|Debt issuance cost paid                                                  |                                                             |                                | (0.2   | )          |       |                |       |              |     |                           |      
|Cost of early extinguishment of debt                                     |                                                             |                                | (31.7  | )          |       |                |       |              |     |                           |      
|Capital contributions from parent                                        |                                                             |                                | 333.2  |            |       |                |       |              |     |                           |      
|                                                                         |                                                             |                                |        |            |       |                 |       |              |      |                           |      
|Net cash (used in) provided by financing activities                      |                                                             |                                | (74.0  | )          |       | (0.3            | )     |              | 2.8  |                           |      
|                                                                         |                                                             |                                |        |            |       |                 |       |              |      |                           |      
|Effect of exchange rate changes on cash                                  |                                                             |                                | (0.2   | )          |       |                |       |              | (0.1 | )                         |      
|                                                                         |                                                             |                                |        |            |       |                 |       |              |      |                           |      
|Increase (decrease) in cash and cash equivalents                         |                                                             |                                | 1.2    |            |       | (0.3            | )     |              | 6.4  |                           |      
|Cash and cash equivalents at beginning of period                         |                                                             |                                | (0.1   | )          |       | 3.5             |       |              | 8.3  |                           |      
|                                                                         |                                                             |                                |        |            |       |                 |       |              |      |                           |      
|Cash and cash equivalents at end of period                               |                                                             | $                              | 1.1    |            | $     | 3.2             |       | $            | 14.7 |                           | $    
|                                                                         |                                                             |                                |        |            |       |                 |       |              |      |                           |      

32

---



HUNTSMAN LLC AND SUBSIDIARIES        CONSOLIDATING STATEMENTS OF CASH FLOWS        FOR THE THREE MONTHS ENDED MARCH 31, 2004 (Unaudited)        (Dollars in Millions)

|                                                                         |                                                                      | Parent
Company                 |       | Guarantors |        | Non-
Guarantors |      | Eliminations |      | Consolidated
Huntsman LLC |      
|------------------------------------------------------------------------ | -------------------------------------------------------------------- | ------------------------------ | ----- | ---------- | ------ | --------------- | ---- | ------------ | ---- | ------------------------- | -----
|Cash flows from operating activities:                                    |                                                                      |                                |       |            |        |                 |      |              |      |                           |      
|Net loss                                                                 |                                                                      | $                              | (55.0 | )          | $      | (56.8           | )    | $            | (2.0 | )                         | $    
|Adjustments to reconcile net loss to net cash from operating activities: |                                                                      |                                |       |            |        |                 |      |              |      |                           |      
|                                                                         | Equity in (income) losses of investment in unconsolidated affiliates |                                |       | 60.9       |        |                 | 38.4 |              |      | (0.7                      | )    
|                                                                         | Depreciation and amortization                                        |                                |       | 3.8        |        |                 | 23.5 |              |      | 5.3                       |      
|                                                                         | Recovery of losses on accounts receivable                            |                                |       | (0.5       | )      |                 | (1.4 | )            |      |                          |      
|                                                                         | Loss on disposal of plant and equipment                              |                                |       |           |        |                 | 0.2  |              |      |                          |      
|                                                                         | Non-cash interest expense                                            |                                |       | 1.4        |        |                 | 0.3  |              |      |                          |      
|                                                                         | Loss on early extinguishment of debt                                 |                                |       |           |        |                 | 1.9  |              |      |                          |      
|                                                                         | Non-cash interest on affiliate debt                                  |                                |       |           |        |                 |     |              |      | 0.3                       |      
|                                                                         | Deferred income taxes                                                |                                |       |           |        |                 |     |              |      | (0.9                      | )    
|                                                                         | Minority interest in subs                                            |                                |       |           |        |                 | (0.8 | )            |      |                          |      
|                                                                         | Net changes in operating assets and liabilities:                     |                                |       |            |        |                 |      |              |      |                           |      
|                                                                         |                                                                      | Accounts and notes receivables |       |            | 45.2   |                 |      | 234.6        |      |                           | (54.3
|                                                                         |                                                                      | Inventories                    |       |            | (2.4   | )               |      | 13.1         |      |                           | 0.7  
|                                                                         |                                                                      | Prepaid expenses               |       |            | 0.7    |                 |      | 10.2         |      |                           | 0.1  
|                                                                         |                                                                      | Other current assets           |       |            |       |                 |      | 0.4          |      |                           | (1.9 
|                                                                         |                                                                      | Other noncurrent assets        |       |            | 2.2    |                 |      | (7.9         | )    |                           | (0.6 
|                                                                         |                                                                      | Accounts payable               |       |            | (146.5 | )               |      | (165.4       | )    |                           | 42.1 
|                                                                         |                                                                      | Accrued liabilities            |       |            | 3.9    |                 |      | (20.9        | )    |                           | 13.3 
|                                                                         |                                                                      | Other noncurrent liabilities   |       |            | 1.6    |                 |      | (1.0         | )    |                           | 0.3  
|                                                                         |                                                                      |                                |       |            |        |                 |      |              |      |                           |      
|Net cash (used in) provided by operating activities                      |                                                                      |                                | (84.7 | )          |        | 68.4            |      |              | 1.7  |                           |      
|                                                                         |                                                                      |                                |       |            |        |                 |      |              |      |                           |      
|Investing activities:                                                    |                                                                      |                                |       |            |        |                 |      |              |      |                           |      
|Capital expenditures for plant and equipment                             |                                                                      |                                | (0.4  | )          |        | (12.9           | )    |              | (2.6 | )                         |      
|Net borrowings (payments) on intercompany debt                           |                                                                      |                                | 19.4  |            |        | (20.8           | )    |              | 1.4  |                           |      
|Change in restricted cash                                                |                                                                      |                                | 0.3   |            |        | 1.5             |      |              |     |                           |      
|                                                                         |                                                                      |                                |       |            |        |                 |      |              |      |                           |      
|Net cash provided by (used in) investing activities                      |                                                                      |                                | 19.3  |            |        | (32.2           | )    |              | (1.2 | )                         |      
|                                                                         |                                                                      |                                |       |            |        |                 |      |              |      |                           |      
|Financing activities:                                                    |                                                                      |                                |       |            |        |                 |      |              |      |                           |      
|Net borrowings on revolving loan facilities                              |                                                                      |                                | 72.8  |            |        |                |      |              |     |                           |      
|Repayment of long-term debt                                              |                                                                      |                                | (0.9  | )          |        | (36.9           | )    |              | (0.8 | )                         |      
|                                                                         |                                                                      |                                |       |            |        |                 |      |              |      |                           |      
|Net cash provided by (used in) financing activities                      |                                                                      |                                | 71.9  |            |        | (36.9           | )    |              | (0.8 | )                         |      
|                                                                         |                                                                      |                                |       |            |        |                 |      |              |      |                           |      
|Effect of exchange rate changes on cash                                  |                                                                      |                                | 0.1   |            |        | 0.8             |      |              | (1.6 | )                         |      
|                                                                         |                                                                      |                                |       |            |        |                 |      |              |      |                           |      
|Increase (decrease) in cash and cash equivalents                         |                                                                      |                                | 6.6   |            |        | 0.1             |      |              | (1.9 | )                         |      
|Cash and cash equivalents at beginning of period                         |                                                                      |                                | 0.8   |            |        | 0.4             |      |              | 18.3 |                           |      
|                                                                         |                                                                      |                                |       |            |        |                 |      |              |      |                           |      
|Cash and cash equivalents at end of period                               |                                                                      | $                              | 7.4   |            | $      | 0.5             |      | $            | 16.4 |                           | $    
|                                                                         |                                                                      |                                |       |            |        |                 |      |              |      |                           |      

33

---





ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Forward-looking Statements

Some of the statements contained in this report are forward-looking in nature. In some cases, you can identify forward-looking statements by terminology such as
"believes," "expects," "may," "will," "should," "anticipates" or "intends" or the negative of such terms or other comparable terminology, or by discussions of strategy. You are cautioned that our
business and operations are subject to a variety of risks and uncertainties, and, consequently, our actual results may materially differ from those projected by any forward-looking statements. Some of
the risks and uncertainties are discussed below in "Cautionary Statement for Forward-Looking Information" and elsewhere in this report.

Certain Defined Terms

For convenience in this report, the terms "Company," "our," "us" or "we" may be used to refer to Huntsman LLC and, unless the context otherwise requires, its
subsidiaries. In this report, "HI" refers to Huntsman International LLC, "HIH" refers to Huntsman International Holdings LLC, "Huntsman Specialty" refers to Huntsman Specialty Chemicals Corporation,
"HMP" refers to HMP Equity Holdings Corporation, "Huntsman Holdings" refers to Huntsman Holdings, LLC, "Huntsman Corporation" refers to Huntsman Corporation and its predecessors, and, unless the
context otherwise requires, their subsidiaries, "AdMat" refers to Huntsman Advanced Materials LLC and, unless the context otherwise requires, its subsidiaries, and "MatlinPatterson" refers to
MatlinPatterson Global Opportunities Partners L.P. and its affiliates.

Overview

We are a global manufacturer and marketer of differentiated and commodity chemical products. Our products are used in a wide range of applications, including
those in the adhesives, automotive, construction products, durable and non-durable consumer products, medical, packaging, paints and coatings, power generation, refining and synthetic
fiber industries. We operate at facilities located in North America, Europe, Asia, Australia, South America and Africa. Our business is organized around our three segments: Performance Products,
Polymers and Base Chemicals. The major products of each operating segment are as follows:

|Segment              |  | Products                                                                                                                                                       
|-------------------- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------
|Performance Products |  | Amines, surfactants, linear alkylbenzene, maleic anhydride, other performance chemicals, glycols and technology licenses                                       
|Polymers             |  | Ethylene (produced at our Odessa, Texas facilities primarily for internal use), polyethylene, polypropylene, expandable polystyrene, styrene and other polymers
|Base Chemicals       |  | Olefins (primarily ethylene and propylene), butadiene, MTBE, benzene, paraxylene and cyclohexane                                                               

Our
products are divided into two broad categoriesdifferentiated and commodity chemicals. Our Performance Products segment produces differentiated products, and our Polymers
and Base Chemicals segments produce commodity chemicals. Among our commodity products, certain products in our Polymers segment follow different trends than petrochemical commodities as a result of
our niche marketing strategy for such products that focuses on supplying customized formulations. Nevertheless, each of our three operating segments is impacted to some degree by economic conditions,
prices of raw materials and global supply and demand pressures.

34

---



In
our Performance Products segment, demand for our performance specialties has generally continued to grow at rates in excess of GDP as overall demand is significantly influenced by new
product and application development. Overall demand for most of our performance intermediates has generally been stable. In ethylene glycol and maleic anhydride, higher industry capacity utilization
rates due to stronger demand have resulted in higher profitability compared with the first quarter of 2004.

The
profitability of our Polymers and Base Chemicals segments has historically been cyclical in nature. The industry has recently operated in a down cycle that resulted from significant
new capacity additions, weak demand reflecting soft global economic conditions and high crude oil and natural gas-based raw material costs. Despite continued high feedstock costs, the
profitability of our Base Chemicals segment has improved in 2005 as demand has strengthened and average selling prices and profit margins have increased in most of our product lines.

Recent Developments

Huntsman Corporation Initial Public Offering

On February 16, 2005, Huntsman Corporation, our parent corporation, completed an initial public offering of 55,681,819 shares of its common stock sold by
Huntsman Corporation and 13,579,546 shares of its common stock sold by a selling stockholder, in each case at a price to the public of $23 per share, and 5,750,000 shares of its 5% mandatory
convertible preferred stock sold by Huntsman Corporation at a price to the public of $50 per share. Net proceeds to Huntsman Corporation from the offering were approximately $1,500 million,
substantially all of which was used to repay outstanding indebtedness of certain of Huntsman Corporation's subsidiaries, including HMP, our Company and HIH as follows:



In
connection with the repayment of the indebtedness discussed above, we reported a loss on early extinguishment of debt during the first quarter of 2005 of $38.3 million.

Reduction in Our Percentage Ownership of HIH

Prior to February 16, 2005, we owned 60% of the membership interests in HIH. In connection with Huntsman Corporation's initial public offering of common
and preferred stock and the related reorganization transactions among certain affiliates, our ownership of HIH was reduced to 42% effective February 16, 2005. Accordingly, beginning in
March 2005, we no longer consolidate HIH with our results of operations. In this report, we have reflected our membership interest in HIH using the equity method for all periods presented.

35

---



Exchange Offer for HLLC Senior Notes

On June 22, 2004, we sold $300 million of our senior unsecured fixed rate notes that bear interest at 11.5% and mature on July 15, 2012 (the
"HLLC Unsecured Fixed Rate Notes") and $100 million of our senior unsecured floating rate notes that bear interest at a rate equal to LIBOR plus 7.25% and mature on July 15, 2011 (the
"HLLC Unsecured Floating Rate Notes," and together with the HLLC Unsecured Fixed Rate Notes, the "HLLC Senior Notes"). We filed a registration statement on Form S-4 with the SEC on
April 19, 2005 with respect to the HLLC Senior Notes. We filed an amendment to such registration statement on May 2, 2005. The SEC declared our registration statement effective on
May 5, 2005. We expect to complete an exchange offer for the HLLC Senior Notes approximately 30 days after the effective date of the registration statement.

Production Capacity Expansions

On April 26, 2005, we announced our intention to pursue the expansion of our annual maleic anhydride manufacturing capacity by 100 million pounds.
The new capacity, which could be on line as early as the first quarter of 2008, will increase our production capacity in the Americas by over 40% to 335 million pounds.

On
April 29, 2005, we announced our intention to increase our ethanolamines manufacturing capacity by 70 million pounds per year, bringing total capacity at our Port
Neches, Texas production facility to 410 million pounds per year. We have begun the engineering for the expansion project and expect to have the new capacity on line by the first quarter of
2006.

36

---



Results of Operations

The following sets forth the consolidated results of operations for the three months ended March 31, 2005 and 2004.

Three months ended
March 31,Percent Change2005

2004Revenues

$
1,204.5

$
939.7

28
%Cost of goods sold


1,043.1


870.7

20
%Gross profit


161.4


69.0

134
%Operating expenses


41.9


38.9

8
%Restructuring and plant closing costs


3.4




NMOperating income


116.1


30.1

286
%Interest expense, net


(40.7
)

(46.8
)
13
%Equity in income (losses) of unconsolidated affiliates


34.9


(39.1
)
NMOther expense


(38.5
)

(1.6
)
NMIncome (loss) before income taxes


71.8


(57.4
)
NMIncome tax benefit


0.8


2.4

67
%Net income (loss)


72.6


(55.0
)
NMInterest expense, net


40.7


46.8

13
%Income tax benefit


(0.8
)

(2.4
)
67
%Depreciation and amortization


31.0


32.6

5
%EBITDA(1)

$
143.5

$
22.0

NM


---

NMNot
meaningful.

Included
in EBITDA are the following unusual items of expense:

Three months ended
March 31,2005

2004Early extinguishment of debt

$
(38.3
)
$
(1.9
)Restructuring and plant closing costs:Performance Products

$
(1.0
)
$
Polymers


(1.9
)

Base Chemicals


(0.5
)

Total restructuring and plant closing costs


(3.4
)

Total unusual items of expense included in EBITDA

$
(41.7
)
$
(1.9
)


---

37

---





38

---





Three months ended March 31,Percent
Change2005

2004EBITDA(1)

$
143.5

$
22.0

NMDepreciation and amoritization


(31.0
)

(32.6
)
(4.9
)%Interest expense, net


(40.7
)

(46.8
)
(13.0
)%Income tax benefit


0.8


2.4

(66.7
)%Net income (loss)


72.6


(55.0
)
NMProvision for (recovery of) losses on accounts receivable


1.2


(1.9
)
NMEquity in (earnings) losses of investment in unconsolidated affiliates


(34.9
)

39.1

NMDepreciation and amortization expense


31.0


32.6

(4.9
)%Non-cash interest


0.9


2.0

NMDeferred income tax


(0.1
)

(0.9
)
(88.9
)%Loss on early retirement of debt


38.3


1.9

NMOther, net


0.8


0.2

NMChanges in operating assets and liabilities


(9.6
)

(32.6
)
NMNet cash provided by (used in) operating activites

$
100.2

$
(14.6
)
NM


---

NMNot
meaningful

Three Months Ended March 31, 2005 Compared to Three Months Ended March 31, 2004

For the three months ended March 31, 2005 we had net income of $72.6 million on revenues of $1,204.5 million compared to a net loss of
$55.0 million on revenues of $939.7 million for the three months ended March 31, 2004. The increase of $127.6 million in net income was the result of the following items:



39

---





The
following table sets forth the revenues and EBITDA for each of our operating segments:

Three months endedMarch 31,
2005

March 31,
2004

Percent
ChangeRevenues:Performance Products

$
338.2

$
301.5

12
%Polymers


413.6


314.5

32
%Base Chemicals


540.8


385.3

40
%Eliminations


(88.1
)

(61.6
)
43
%Total

$
1,204.5

$
939.7

28
%Segment EBITDAPerformance Products

$
66.7

$
33.5

99
%Polymers


44.9


18.9

138
%Base Chemicals


59.4


21.9

171
%Corporate and other


(27.5
)

(52.3
)
NMTotal

$
143.5

$
22.0

552
%


---

NMNot
meaningful

Performance Products

For the three months ended March 31, 2005, Performance Products revenues increased by $36.7 million, or 12%, as compared to the same period in 2004,
primarily as a result of higher average selling prices for all major product lines, offset somewhat by lower sales volumes in certain product lines. Overall, average selling prices increased by 20% in
response to higher raw material and energy costs and improved market conditions. Sales volumes declined by 7%, principally due to lower sales of certain surfactants products.

For
the three months ended March 31, 2005, Performance Products segment EBITDA increased by $33.2 million, or 99%, as compared to the same period in 2004. During the three
months ended March 31, 2005, we recorded restructuring charges of $1.0 million. For further discussion of restructuring activities, see "Liquidity and Capital
ResourcesRestructuring and Plant Closing Costs" below. Excluding these restructuring charges, Performance Products segment EBITDA increased by $34.2 million resulting primarily
from higher margins as average selling prices increased more than raw material and energy costs.

Polymers

For the three months ended March 31, 2005, Polymers revenues increased by $99.1 million, or 32%, as compared to the same period in 2004, due mainly
to 41% higher average selling prices, offset somewhat by 6% lower sales volumes. Average selling prices were higher primarily due to tighter market conditions and to higher raw material and energy
costs. Sales volumes decreased principally due to lower production and reduced demand for certain products.

For
the three months ended March 31, 2005, Polymers segment EBITDA increased by $26.0 million, or 138%, as compared to the same period in 2004. During the three months
ended March 31, 2005, our Polymers segment recorded restructuring and plant closing charges of $1.9 million.

40

---



For
further discussion of restructuring activities, see "Liquidity and Capital ResourcesRestructuring and Plant Closing Costs" below. Excluding these restructuring charges,
Polymers segment EBITDA increased by $27.9 million resulting primarily from higher contribution margins as average selling prices increased more than raw material and energy costs.

Base Chemicals

For the three months ended March 31, 2005, Base Chemicals revenues increased by $155.5 million, or 40%, as compared to the same period in 2004 due
principally to a 41% increase in average selling prices and a 1% increase in sales volumes. Average selling prices increased primarily in response to higher raw material and energy costs. Sales
volumes increases were driven by increases in sales volumes of olefins, MTBE and cyclohexane of 4%, 2% and 8%, respectively, principally as a result of increased demand.

For
the three months ended March 31, 2005, Base Chemicals segment EBITDA increased by $37.5 million or 171%, as compared to the same period in 2004. During the three months
ended March 31, 2005, the Base Chemicals segment recorded restructuring and plant closing charges of $0.5 million. For further discussion of restructuring activities, see
"Liquidity and Capital ResourcesRestructuring and Plant Closing Costs" below. Excluding these restructuring charges, the Base Chemicals segment EBITDA increased by
$38.0 million, resulting primarily from higher margins as average selling prices increased more than raw material and energy costs.

Corporate and Other

Corporate and other items include unallocated corporate overhead, unallocated foreign exchange gains and losses and other non-operating income and
expense. For the three months ended March 31, 2005, EBITDA from corporate and other items improved by $24.8 million to a loss of $27.5 million from a loss of $52.3 million
for the same period in 2004, primarily as a result of a change in equity in earnings of unconsolidated affiliates of $74.0 million, partially offset by a $38.3 million loss on early
extinguishment of debt.

Liquidity and Capital Resources

Cash

Net cash provided by operating activities for the three months ended March 31, 2005 was $100.2 million as compared to net cash used in operating
activities of $14.6 million for the three months ended March 31, 2004. This increase is primarily attributable to a higher net income of $127.6 million and a decrease in net
operating assets and liabilities of $23.0 million. In addition, there was a favorable variance of $36.4 million in loss on early extinguishment of debt, partially offset by an
unfavorable variance of $74.0 million in equity in losses of investments in unconsolidated affiliates.

Capital
expenditures for the three months ended March 31, 2005 were $20.7 million as compared to $15.9 million for the same period in 2004.

Net
cash used in financing activities for the three months ended March 31, 2005 was $(71.5) million as compared to cash provided by financing activities of
$34.2 million provided by financing activities in the three months ended March 31, 2004. This variance is primarily related to the repayment of $60.8 million of revolver
borrowings resulting from positive cash flow from operations during the 2005 period as compared to $72.8 million of borrowings required in the comparable period 2004 due to negative cash flow
from operations. In addition, as a result of Huntsman Corporation's initial public offering, we received $333.2 million in contributions that were used to repay indebtedness.

41

---



Changes in Financial Condition

The following information summarizes our net working capital position as of March 31, 2005 and December 31, 2004 (dollars in millions):

March 31,
2005

December 31,
2004

DifferenceCurrent assets:Cash, cash equivalents, and restricted cash

$
28.3

$
20.6

$
7.7Accounts and notes receivables


611.3


618.4


(7.1
)Inventories


369.4


338.8


30.6Prepaid expenses


13.7


21.9


(8.2
)Deferred income taxes


0.7


0.7


Other current assets


15.4


15.2


0.2Total current assets


1,038.8


1,015.6


23.2Current liabilities:Accounts payable


383.0


340.0


43.0Accrued liabilities


226.4


261.0


(34.6
)Deferred income taxes


8.2


8.2


Current portion of long-term debt


15.2


25.3


(10.1
)Total current liabilities


632.8


634.5


(1.7
)Working capital

$
406.0

$
381.1

$
24.9


At
March 31, 2005 our net working capital position was $406.0 million as compared to $381.1 million at December 31, 2004, resulting in an increase of
$24.9 million. The changes in working capital can be explained as follows:



Debt and Liquidity



On October 14, 2004, we completed a $1,065 million refinancing of our senior secured credit facilities (as refinanced, the "HLLC Credit
Facilities"). The HLLC Credit Facilities consist of a $350 million revolving credit facility due October 2009 (the "HLLC Revolving Facility") and a $715 million term loan B
facility due March 2010 (the "HLLC Term Facility"). Proceeds of the refinancing were used to repay in full the outstanding borrowings under our prior senior secured credit facilities. The HLLC
Term Facility has scheduled annual amortization payments of approximately $7 million, with the remaining balance due at maturity.

The
HLLC Revolving Facility is secured by a first priority lien on substantially all of our current and intangible assets and those of our domestic restricted subsidiaries; and is
secured by a second priority lien on substantially all of our property, plant and equipment and those of our restricted

42

---



domestic
subsidiaries and our indirect equity interest in HIH. The HLLC Term Facility is secured by a first priority lien on substantially all of our property, plant and equipment and that of our
restricted domestic subsidiaries and our indirect equity interest in HIH; and by a second priority lien on substantially all of our current and intangible assets and those of our restricted domestic
subsidiaries. The HLLC Credit Facilities are also guaranteed by Huntsman Specialty Chemicals Holdings Corporation and Huntsman Specialty and by our domestic restricted subsidiaries (collectively, the
"HLLC Guarantors"). Neither HIH nor HI is our restricted subsidiary and they are not HLLC Guarantors.

The
HLLC Revolving Facility is subject to a borrowing base of accounts receivable and inventory and is available for general corporate purposes. Borrowings under the HLLC Revolving
Facility bear interest, at our option, at a rate equal to (i) a LIBOR-based eurocurrency rate plus an applicable margin of 2.25%, or (ii) a prime-based rate plus an applicable margin of
1.25%. The HLLC Revolving Facility allows us to borrow up to $50 million secured by letters of credit; however, the $350 million revolving credit facility is reduced
dollar-for-dollar by any letters of credit outstanding.

As
of March 31, 2005 and 2004, the weighted average interest rates on our senior credit facilities were 5.9% and 5.8%, respectively, excluding the impact of interest rate hedges.
As of March 31, 2005, the HLLC Revolving Facility and HLLC Term Facility bear interest at LIBOR plus 2.25% per year and LIBOR plus 3.0% per year, respectively. In accordance with the HLLC Term
Facility agreement, as a result of Huntsman Corporation's initial public offering of common and preferred stock and the use of offering proceeds for the permanent reduction of indebtedness by us, the
HLLC Term Facility interest rate margin decreased from LIBOR plus 3.50% to LIBOR plus 3.0%. The agreements governing the HLLC Credit Facilities contain customary financial covenants; covenants
relating to the incurrence of debt, the purchase and sale of assets, limitations on investments and affiliate transactions; change of
control provisions; events of default provisions; and acceleration provisions. Management believes that we were in compliance with the covenants of the HLLC Credit Facilities as of March 31,
2005.



On September 30, 2003, we sold $380 million aggregate principal amount of 11.625% senior secured notes due October 15, 2010 at an issue price
of 98.8% (the "September 2003 Offering"). On December 3, 2003, we sold an additional $75.4 million aggregate principal amount of senior secured notes (collectively with the notes
sold in the September 2003 Offering, the "HLLC Senior Secured Notes") at an issue price of 99.5%. Interest on the HLLC Senior Secured Notes is payable semiannually on April 15 and
October 15. The effective interest rate is 11.9%. The HLLC Senior Secured Notes are effectively subordinated to all our obligations under the HLLC Revolving Facility and rank pari passuwith the
HLLC Term Facility. The HLLC Senior Secured Notes are guaranteed by the HLLC Guarantors.

The
HLLC Senior Secured Notes are redeemable after October 15, 2007 at 105.813% of the principal amount thereof, declining ratably to par on and after October 15, 2009. At
any time prior to October 15, 2006, we may redeem up to 35% of the aggregate principal amount of the HLLC Senior Secured Notes at a redemption price of 111.625% with net cash proceeds of a
qualified equity offering. As a result of Huntsman Corporation's initial public offering of common and preferred stock, we redeemed 35%, or approximately $159.4 million, of the aggregate
principal amount of the HLLC Senior Secured Notes on February 28, 2005 and paid a call premium of approximately $18.5 million. Following this partial redemption of the HLLC Senior
Secured Notes, there remain approximately $296.0 million in aggregate principal amount of the HLLC Senior Secured Notes outstanding.

The
indenture governing the HLLC Senior Secured Notes contains covenants relating to the incurrence of debt, limitations on distributions, asset sales and affiliate transactions, among
other things. The indenture also requires us to offer to repurchase the HLLC Senior Secured Notes upon a change of control. Management believes that we were in compliance with the covenants of the
HLLC Senior Secured Notes as of March 31, 2005.

43

---







On June 22, 2004, we sold $300 million of our senior unsecured fixed rate notes that bear interest at 11.5% and mature on July 15, 2012 (the
"HLLC Unsecured Fixed Rate Notes") and $100 million of our senior unsecured floating rate notes that bear interest at a rate equal to LIBOR plus 7.25% and mature on July 15, 2011 (the
"HLLC Unsecured Floating Rate Notes," and together with the HLLC Unsecured Fixed Rate Notes, the "HLLC Senior Notes"). The interest rate on the HLLC Unsecured Floating Rate Notes as of
March 31, 2005 was 9.91%, before additional interest as discussed below. Interest on the HLLC Unsecured Fixed Rate Notes is paid each January 15 and July 15 and is paid on the
HLLC Unsecured Floating Rate Notes on the 15th of January, April, July and October. The proceeds from the offering of the HLLC Senior Notes were used to repay $362.9 million on our prior term
loan B and $25 million to repay indebtedness at HCCA. See "Other Debt" below. The HLLC Senior Notes are our unsecured obligations and are guaranteed by the HLLC Guarantors.

The
HLLC Unsecured Fixed Rate Notes are redeemable after July 15, 2008 at 105.75% of the principal amount thereof, declining ratably to par on and after July 15, 2010. The
HLLC Unsecured Floating Rate Notes are redeemable after July 15, 2006 at 104.0% of the principal amount thereof, declining ratably to par on and after July 15, 2008. At any time prior to
July 15, 2007, we may redeem up to 40% of the aggregate principal amount of the HLLC Unsecured Fixed Rate Notes at a redemption price of 111.5% with proceeds of a qualified equity offering. At
any time prior to July 15, 2006, we may redeem up to 40% of the aggregate principal amount of the HLLC Unsecured Floating Rate Notes with the proceeds of a qualified equity offering at a
redemption price equal to the par value plus LIBOR plus 7.25%. As a result of Huntsman Corporation's initial public offering of common and preferred stock, we redeemed 34%, or approximately
$102.0 million of combined aggregate principal amount of the HLLC Unsecured Fixed Rate Notes on March 14 and March 17, 2005 with combined call premiums of approximately
$11.7 million. Following this partial redemption, there remain approximately $198.0 million in aggregate principal amount of the HLLC Unsecured Fixed Rate Notes outstanding.

The
indenture governing the HLLC Senior Notes contains covenants relating to the incurrence of debt and limitations on distributions, asset sales and affiliate transactions, among other
things. The indenture also requires us to offer to repurchase the HLLC Senior Notes upon a change of control. Management believes that we were in compliance with the covenants of the HLLC Senior Notes
as of March 31, 2005.

Under
the terms of a registration rights agreement among us, the HLLC Guarantors and the initial purchasers of the HLLC Senior Notes, we were required to file a registration statement
relating to an
exchange offer for the HLLC Senior Notes on or before November 19, 2004 (the "Filing Date"). Under the terms of the registration rights agreement, because we did not file the registration
statement by the Filing Date, we are required to pay additional interest on the HLLC Senior Notes at a rate of 0.25% per year for the first 90 day period following the Filing Date, and 0.50%
per year for the second 90 day period following the Filing Date, which we were paying as of March 31, 2005. We have filed the registration statement with the SEC and the registration
statement was declared effective on May 5, 2005, and the additional interest ceased to accrue as of the preceding day.



Our 9.5% fixed and variable subordinated notes due 2007 (the "HLLC Notes") with an outstanding principal balance of $59.3 million as of March 31,
2005 are our unsecured subordinated obligations and are junior in right of payment to all of our existing and future secured or unsecured senior indebtedness and effectively junior to any of our
secured indebtedness to the extent that collateral secures such indebtedness. Interest is payable on the HLLC Notes semiannually on January 1 and July 1 at an annual rate of 9.5% on the
fixed rate notes and LIBOR plus 3.25% on the floating

44

---



rate
notes. The HLLC Notes are redeemable at our option after July 2002 at a price declining from 104.75% to 100% of par value as of July 1, 2005. The weighted average interest rate on
the floating rate notes was 6.04% and 5.19% as of March 31, 2005 and 2004, respectively. As a result of previously executed amendments to the indentures, virtually all the restrictive covenants
contained in the indentures have been eliminated.

On
January 28, 2004, we used $37.5 million of the net cash proceeds from the December 2003 offering to redeem, in full, Huntsman Polymers' senior unsecured notes
(the "Huntsman Polymers Notes") with a principal amount of $36.8 million plus accrued interest. The Huntsman Polymers Notes were unsecured senior obligations of Huntsman Polymers; they had an
original maturity of December 2004, and a fixed interest rate of 11.75%.



Huntsman Specialty's subordinated note, in the aggregate principal amount of $75.0 million, accrued interest until April 15, 2002 at 7% per annum.
Pursuant to the note agreement, effective April 15, 2002, all accrued interest was added to the principal of the note for a total principal amount of $106.6 million. Such principal
balance will be payable in a single installment on April 15, 2008. Interest has been payable quarterly in cash, commencing July 15, 2002. For financial reporting purposes, the note was
initially recorded at its estimated fair value of $58.2 million, based on prevailing market rates as of the effective date. As of March 31, 2005 and December 31, 2004, the
unamortized discount on the note was $5.0 million and $5.4 million, respectively.

Huntsman
Corporation Australia Pty Ltd. ("HCA"), our indirect Australian subsidiary that holds its Australian surfactants assets, maintains credit facilities (the "HCA
Facilities"). As of March 31, 2005, borrowings under the HCA Facilities totaled A$57.5 million ($44.3 million), which include A$41.8 million ($32.2 million) on the
term loan facility and A$15.2 million ($11.7 million) on the revolving credit line. On August 31, 2004, HCA refinanced the previously existing debt facilities with an
A$30.0 million ($23.1 million) revolving credit line supported by a borrowing base of eligible accounts receivable and inventory and an A$44.0 million ($33.9 million) term
facility.

Huntsman
Chemical Company Australia Pty Ltd. ("HCCA") and certain Australian affiliates hold our Australian styrenics assets. On August 31, 2004, HCCA refinanced the
previously existing debt facilities of HCCA with an A$30.0 million ($23.1 million) revolving credit line supported by a borrowing base of eligible accounts receivable (the "HCCA
Facility"). As of March 31, 2005 borrowings under the HCCA Facility totaled A$22.2 million ($17.1 million).

The
HCA Facilities and the HCCA Facility are secured by a lien on substantially all their respective assets, bear interest at a rate of 2.9% above the Australian base rate, mature in
August 2007 and are non-recourse to us. As of March 31, 2005, the interest rate on the HCA Facilities and the HCCA Facility was 8.7%. On June 24, 2004, we used
$25 million of proceeds from the offering of the HLLC Senior Unsecured Notes to repay a portion of the previously existing debt facilities of HCCA. Management believes that HCA and HCCA are in
compliance with the covenants of the HCA Facilities and the HCCA Facility as of March 31, 2005.

On
July 2, 2001, we entered into a 15% note payable (the "Affiliate Note") with an affiliated entity in the amount of $25.0 million. Interest on the Affiliate Note was not
paid in cash, but accrued at a designated effective rate of 15% per annum, compounded annually. On February 16, 2005, the Affiliate Note was satisfied in full from proceeds of Huntsman
Corporation's initial public offering. As of December 31, 2004 and February 16, 2005, accrued interest added to the principal balance was $15.9 million and $16.6 million,
respectively.

As
of March 31, 2005, we had $3.4 million outstanding on short term notes payable for financing a portion of our insurance premiums. Such notes have monthly scheduled
amortization payments through

45

---



the
second quarter of 2005, bear interest at rates ranging from 3.65% to 4.0%, and are secured by unearned insurance premiums.



We depend upon the HLLC Revolving Facility to provide liquidity for our operations and working capital needs. As of March 31, 2005, we had
$61.3 million of outstanding borrowings and approximately $17.6 million of outstanding letters of credit under our $350 million HLLC revolving facility. We had
$28.3 million of cash on our balance sheet as of March 31, 2005. As of March 31, 2005, we had cash and unused borrowing capacity of approximately $299.4 million. During the
first quarter of 2005, we repaid $63.7 million on the HLLC Revolving Facility from operating cash flows.

We
believe our current liquidity, together with funds generated by our businesses, is sufficient to meet the short-term and long-term needs of our businesses,
including funding operations, making capital expenditures and servicing our debt obligations in the ordinary course. We believe that we are currently in compliance with the covenants contained in our
credit agreements and the indentures governing our notes.

Off-Balance Sheet Arrangements

Other than certain operating leases that are material, which have been entered into in the normal course of business, we do not have any off-balance
sheet financing arrangements such as synthetic leases or securitization agreements. As such, we are not materially exposed to any financing, liquidity, market or credit risk that may arise if we had
engaged in such financing arrangements.

Restructuring

As of March 31, 2005, accrued restructuring and plant closing costs by type of cost and activity consist of the following (dollars in millions):

|                                            |  | Workforce
reductions(1) |      | Demolition and
decommissioning |   | Non-cancelable
lease costs |  | Other
restructuring
costs |     | Total(2) |  
|------------------------------------------- |  | ----------------------- | ---- | ------------------------------ | - | -------------------------- |  | ------------------------- | --- | -------- | -
|Accrued liabilities as of December 31, 2004 |  | $                       | 11.0 |                                | $ | 2.5                        |  | $                         |    |          | $
|2005 charges for 2004 activities            |  |                         | 0.3  |                                |   |                           |  |                           | 0.5 |          |  
|2005 payments for 2004 activities           |  |                         | (2.4 | )                              |   |                           |  |                           |    |          |  
|Foreign currency effect on reserve balance  |  |                         | (0.1 | )                              |   |                           |  |                           |    |          |  
|                                            |  |                         |      |                                |   |                            |  |                           |     |          |  
|Accrued liabilities as of March 31, 2005    |  | $                       | 8.8  |                                | $ | 2.5                        |  | $                         | 0.5 |          | $
|                                            |  |                         |      |                                |   |                            |  |                           |     |          |  

---

46

---



March 31,
2005

December 31,
20042001 activities

$
2.8

$
2.82004 activities


8.1


10.0Foreign currency effect on reserve balance


0.6


0.7Total

$
11.5

$
13.5


Details
with respect to our reserves for restructuring and plant closing costs are provided below by segments and activity (dollars in millions):

|                                                                             |                                              | Performance
Products |      | Polymers |   | Base
Chemicals |   | Total |     
|---------------------------------------------------------------------------- | -------------------------------------------- | -------------------- | ---- | -------- | - | -------------- | - | ----- | ----
|Accrued liabilities as of December 31, 2004                                  |                                              | $                    | 7.7  |          | $ | 5.8            |   | $     |    
|2005 charges for 2004 activities                                             |                                              |                      | 1.0  |          |   | 1.9            |   |       | 0.5 
|2005 payments for 2004 activities                                            |                                              |                      | (2.3 | )        |   | (2.6           | ) |       | (0.4
|Foreign currency effect on reserve balance                                   |                                              |                      | (0.1 | )        |   |               |   |       |    
|                                                                             |                                              |                      |      |          |   |                |   |       |     
|Accrued liabilities as of March 31, 2005                                     |                                              | $                    | 6.3  |          | $ | 5.1            |   | $     | 0.1 
|Current portion of restructuring reserve                                     |                                              | $                    | 6.3  |          | $ | 2.7            |   | $     | 0.1 
|Long-term portion of restructuring reserve                                   |                                              |                      |     |          |   | 2.4            |   |       |    
|Estimated additional future cash charges for current restructuring projects: |                                              |                      |      |          |   |                |   |       |     
|                                                                             | Estimated additional charges within one year |                      | $    | 5.6      |   | $              |  |       | $   
|                                                                             | Estimated additional charges beyond one year |                      | $    |         |   | $              |  |       | $   

As
of March 31, 2005 and December 31, 2004, we had reserves for restructuring and plant closing costs of $11.5 million and $13.5 million, respectively. During
the three months ended March 31, 2005 we recorded additional charges of $3.4 million (all of which is payable in cash) for workforce reductions, non-cancelable lease costs,
and other restructuring costs associated with closure or curtailment of activities at our smaller, less efficient manufacturing facilities. During the first quarter of 2005, we made cash payments
against these reserves of $5.3 million.

As
of December 31, 2004, our Performance Products segment reserve consisted of $7.7 million related to various restructuring programs, mainly in connection with the closure
of our Guelph, Ontario, St. Louis, Missouri and Austin, Texas facilities. During the three months ended March 31, 2005, our Performance Products segment recorded restructuring charges of
$1.0 million related to 2004 activities, all of which is payable in cash, and made cash payments of $2.3 million. These restructuring activities are expected to result in additional
charges of approximately $5.6 million in 2005.

As
of December 31, 2004, our Polymers segment reserve consisted of $5.8 million related primarily to the closure of an Australian manufacturing unit and restructuring
activities at our Odessa, Texas and Mansonville, Canada facilities. During the three months ended March 31, 2005, our Polymers segment recorded restructuring charges of $1.9 million
related to these activities, all of which are payable in cash, and made cash payments of $2.6 million. These restructuring activities are not expected to result in any additional material
restructuring charges.

During
the three months ended March 31, 2005, our Base Chemicals segment recorded restructuring charges of $0.5 million related to the relocation of our corporate offices
to The Woodlands, Texas and the consolidation of our U.S. purchasing functions, all of which are payable in cash and made cash payments of $0.4 million.

47

---



Capital Expenditures

Capital expenditures for the three months ended March 31, 2005 were $20.7 million. During 2005, we expect to spend approximately $100 million
on capital expenditures.

Environmental, Health and Safety Matters



We are subject to extensive federal, state, local and foreign laws, regulations, rules and ordinances relating to pollution, protection of the environment and the
generation, storage, handling, transportation, treatment, disposal and remediation of hazardous substances and waste materials. In the ordinary course of business, we are subject to frequent
environmental inspections and monitoring and occasional investigations by governmental enforcement authorities. In addition, our production facilities require operating permits that are subject to
renewal, modification and, in certain circumstances, revocation. Actual or alleged violations of environmental laws or permit requirements could result in restrictions or prohibitions on plant
operations, substantial civil or criminal sanctions, as well as, under some environmental laws, the assessment of strict liability and/or joint and several liability. Moreover, changes in
environmental regulations could inhibit or interrupt our operations, or require us to modify our facilities or operations. Accordingly, environmental or regulatory matters may cause us to incur
significant unanticipated losses, costs or liabilities.



We are committed to achieving and maintaining compliance with all applicable environmental, health and safety ("EHS") legal requirements, and we have developed
policies and management systems that are intended to identify the multitude of EHS legal requirements applicable to our operations, enhance compliance with applicable legal requirements, ensure the
safety of our employees, contractors, community neighbors and customers and minimize the production and emission of wastes and other pollutants. Although EHS legal requirements are constantly changing
and are frequently difficult to comply with, these EHS management systems are designed to assist us in our compliance goals while also fostering efficiency and improvement and minimizing overall risk
to us.



We may incur future costs for capital improvements and general compliance under EHS laws, including costs to acquire, maintain and repair pollution control
equipment. For the three months ended March 31, 2005 and 2004, our capital expenditures for EHS matters totaled $2.6 million and $7.9 million, respectively. Since capital
expenditures for these matters are subject to evolving regulatory requirements and depend, in part, on the timing, promulgation and enforcement of specific requirements, we cannot provide assurance
that our recent expenditures will be indicative of future amounts required under EHS laws.



On occasion, we receive notices of violation, enforcement and other complaints from regulatory agencies alleging non-compliance with applicable EHS
law. By way of example, we are aware of the individual matters set out below, which we believe to be the most significant presently pending matters and unasserted claims. Although we may incur costs
or penalties in connection with the governmental proceedings discussed below, based on currently available information and our past experience, we believe that the ultimate resolution of these matters
will not have a material impact on our results of operations, financial position or liquidity.

48

---



In
May 2003, the State of Texas settled an air enforcement case with us relating to our Port Arthur plant. Under the settlement, we are required to pay a civil penalty of
$7.5 million over more than four years, undertake environmental monitoring projects totaling about $1.5 million in costs, and pay $0.4 million in attorney's fees to the Texas
Attorney General. As of March 31, 2005, we have paid $1.9 million toward the penalty and $0.4 million for the attorney's fees. The monitoring projects are underway and on
schedule. We do not anticipate that this settlement will have a material adverse effect on our results of operations, financial position or liquidity.

In
the third quarter of 2004, our Jefferson County, Texas facilities received notification from the Texas Commission on Environmental Quality ("TCEQ") of potential air emission
violations relating to the operation of cooling towers at two of our plants, alleged nuisance odors, and alleged upset air emissions. TCEQ had proposed a penalty of $9,300 for the alleged nuisance
odor violations, but withdrew the allegations and the proposed penalty in a February 28, 2005 letter to Huntsman, thus resolving this issue. The TCEQ proposed $0.2 million for the
alleged upset violations and $0.1 million
for the alleged cooling tower violations. Negotiations are anticipated between us and TCEQ with respect to the resolution of these two alleged violations. We do not believe that the final cost to
resolve these matters will be material.

By
letter dated March 17, 2005, the TCEQ notified us that it intends to pursue an enforcement action as a result of various upset emission events occurring at our Port Arthur
facility between August 2003 and the end of 2004. TCEQ alleged that each upset event is a separate violation of its air emission rules and proposed a civil penalty of $77,137. In a similar
vein, the TCEQ issued a Notice of Enforcement to us on February 16, 2005 for alleged violations at our Port Neches plants arising out of upset emission events on various dates in 2004. TCEQ has
not yet proposed a penalty in this second matter, although we anticipate that it will. We will seek to negotiate a settlement with TCEQ on all of the alleged violations. We do not believe that the
resolution of these matters will result in the imposition of costs material to our results of operations, financial position or liquidity.

See
"Part II, Item 1Legal Proceedings" for a discussion of environmental lawsuits brought by private party plaintiffs.



We have incurred, and we may in the future incur, liability to investigate and clean up waste or contamination at our current or former facilities or facilities
operated by third parties at which we may have disposed of waste or other materials. Similarly, we may incur costs for the cleanup of wastes that were disposed of prior to the purchase of our
businesses. Under some circumstances, the scope of our liability may extend to damages to natural resources. Specifically, under the U.S. Comprehensive Environmental Response, Compensation and
Liability Act of 1980, as amended ("CERCLA"), and similar state laws, a current or former owner or operator of real property may be liable for remediation costs regardless of whether the release or
disposal of hazardous substances was in compliance with law at the time it occurred, and a current owner or operator may be liable regardless of whether it owned or operated the facility at the time
of the release. In addition, under the U.S. Resource Conservation and Recovery Act of 1976, as amended ("RCRA"), and similar state laws, we may be required to remediate contamination originating from
our properties as a condition to our hazardous waste permit. For example, our Odessa, Port Arthur, and Port Neches facilities in Texas are the subject of ongoing remediation requirements under RCRA
authority. In many cases, our potential liability arising from historical contamination is based on operations and other events occurring prior to our ownership of the relevant facility. In these
situations, we frequently obtained an indemnity agreement from the prior owner addressing remediation liabilities arising from pre-closing conditions. We have successfully exercised our
rights under these contractual covenants for a number of sites, and where applicable, mitigated our ultimate remediation liability. We cannot assure you, however, that all of such matters

49

---



will
be subject to indemnity or that our existing indemnities will be sufficient to cover our liabilities for such matters.

We
have been notified by third parties of claims against us or our subsidiaries for cleanup liabilities at approximately 12 former facilities and other third party sites, including but
not limited to sites listed under CERCLA. Based on current information and past experience at other CERCLA sites, we do not expect any of these third-party claims to result in material liability to
us.

One
of these sites, the North Maybe Canyon CERCLA site, includes an abandoned phosphorous mine located in a U.S. National Forest in Idaho. The North Maybe Canyon mine may have been
operated by one of our predecessors for approximately two out of the eight years (1964 to 1972) during which it held mining leases in the area. In 2004, we received from the Forest Service a notice of
potential liability for the mine under CERCLA. According to information from the U.S. government, North Maybe Canyon was actively mined for a total of about 20 years. The current owner, NuWest
Industries, Inc., a subsidiary of Agrium, Inc., operated the mine for at least six of those years. Under an administrative order with the Forest Service and other governmental agencies,
NuWest is currently undertaking an investigation of the site, with a specific focus on the release of selenium-contaminated surface water into streams in the area. To date, no emergency removal action
or other high priority cleanup has been proposed. One of the previous operators of the site, Washington Group
International, Inc., has been the subject of bankruptcy proceedings in which the U.S. Department of Justice asserted a claim for investigation and remediation costs at North Maybe Canyon and
South Maybe Canyon (which we did not own or operate), a similar nearby mine that also is currently under investigation. The government claimed $15.7 million in investigation and remediation
costs for South Maybe Canyon and $3.0 million in investigation costs for North Maybe Canyon. The government stated that cleanup costs at North Maybe Canyon had not yet been estimated. We do not
currently have sufficient information to estimate actual remediation costs or our actual liability, if any, for investigation and cleanup of the North Maybe Canyon site.



We have established financial reserves relating to anticipated environmental cleanup obligations, site reclamation and closure costs and known penalties.
Liabilities are recorded when potential liabilities are either known or considered probable and can be reasonably estimated. Our liability estimates are based upon available facts, existing technology
and past experience. On a consolidated basis, we have accrued approximately $14 million for environmental liabilities as of each of March 31, 2005 and December 31, 2004. Of these
amounts, approximately $2 million are classified as accrued liabilities on our consolidated balance sheets as of each of March 31, 2005 and December 31, 2004, and approximately
$12 million are classified as other noncurrent liabilities on our consolidated balance sheets as of each of March 31, 2005 and December 31, 2004. These accruals each include
approximately $6 million for environmental remediation liabilities. In certain cases, our remediation liabilities are payable over periods of up to 30 years. We may incur losses for
environmental remediation in excess of the amounts accrued; however, we are not able to estimate the amount or range of such losses.



Under the European Union ("EU") Integrated Pollution Prevention and Control Directive ("IPPC"), EU member governments are to adopt rules and implement a
cross-media (air, water and waste) environmental permitting program for individual facilities. While the EU countries are at varying stages in their respective implementation of the IPPC permit
program, we have submitted all necessary IPPC permit applications required to date, and in some cases received completed permits from the applicable government agency. We expect to submit all other
IPPC applications and related documents on a timely basis as the various countries implement the IPPC permit program. Although

50

---



we
do not know with certainty what each IPPC permit will require, we believe, based upon our experience with the permits received to date, that the costs of compliance with the IPPC permit program
will not be material to our results of operations, financial position or liquidity.

In
October 2003, the European Commission adopted a proposal for a new EU regulatory framework for chemicals. Under this proposed new system called "REACH" (Registration,
Evaluation and Authorization of Chemicals), companies that manufacture or import more than one ton of a chemical substance per year would be required to register such manufacture or import in a
central database. The REACH initiative, as proposed, would require risk assessment of chemicals, preparations (e.g., soaps and paints) and articles (e.g., consumer products) before those materials
could be manufactured or imported into EU countries. Where warranted by a risk assessment, hazardous substances would require authorizations for their use. This regulation could impose risk control
strategies that would require capital expenditures by us. As proposed, REACH would take effect in three primary stages over the eleven years following the final effective date (assuming final
approval). The impacts of REACH on the chemical industry and on us are unclear at this time because the parameters of the program are still being actively debated.



The use of MTBE is controversial in the U.S. and elsewhere and may be substantially curtailed or eliminated in the future by legislation or regulatory action. The
presence of MTBE in some groundwater supplies in California and other states (primarily due to gasoline leaking from underground storage tanks) and in surface water (primarily from recreational
watercraft) has led to public concern about MTBE's potential to contaminate drinking water supplies. Heightened public awareness regarding this issue has resulted in state, federal and foreign
initiatives to rescind the federal oxygenate requirements for reformulated gasoline or restrict or prohibit the use of MTBE in particular. For example, California, New York and Connecticut have
adopted rules that prohibit the use of MTBE in gasoline sold in those states as of January 1, 2004. Overall, states that have taken some action to prohibit or restrict the use of MTBE in
gasoline account for a substantial portion of the "pre-ban" U.S. MTBE market. Thus far, attempts by others to challenge these state bans in federal court under the reformulated gasoline
provisions of the federal Clean Air Act have been unsuccessful.

The
U.S. Congress has been considering legislation that would eliminate the oxygenated fuels requirements in the Clean Air Act and phase out or curtail MTBE use over a period of years.
To date, no such legislation has become law. If it were to become law it could result in a federal phase-out of the use of MTBE in gasoline in the U.S., but it would not prevent us from
manufacturing MTBE in our plants. In addition, in March 2000, the EPA announced its intention, through an advanced notice of proposed rulemaking, to phase out the use of MTBE under authority of
the federal Toxic Substances Control Act. EPA has not yet acted on this proposal, however. In Europe, the EU issued a final risk assessment report on MTBE in September 2002. No ban of MTBE was
recommended, though several risk reduction measures relating to storage and handling of MTBE-containing fuel were recommended.

We
currently market approximately 95% of our MTBE to customers located in the U.S. for use as a gasoline additive. Any phase-out or other future regulation of MTBE in other
jurisdictions, nationally or internationally, may result in a significant reduction in demand for our MTBE and in a material loss in revenues or material costs or expenditures. In the event that there
should be a complete phase-out of MTBE in the U.S., we believe we will be able to export MTBE to Europe, Asia or South America, although this may produce a lower level of cash flow than
the sale of MTBE in the U.S. We may also elect to use all or a portion of our precursor TBA to produce saleable products other than MTBE. If we opt to produce products other than MTBE, necessary
modifications to our facilities may require significant capital expenditures and the sale of the other products may produce a materially lower level of cash flow than the sale of MTBE.

51

---



In
addition to the use limitations described above, a number of lawsuits have been filed, primarily against gasoline manufacturers, marketers and distributors, by persons seeking to
recover damages allegedly arising from the presence of MTBE in groundwater. While we have not been named as a defendant in any litigation concerning the environmental effects of MTBE, we cannot
provide assurances that we will not be involved in any such litigation or that such litigation will not have a material adverse effect on our results of operations, financial position or liquidity.

Recently Issued Financial Accounting Standards

In January 2003, the Financial Accounting Standards Board ("FASB") issued Financial Interpretation No. ("FIN") 46,
"Consolidation of Variable Interest Entities." FIN 46 addresses the requirements for business enterprises to consolidate related entities, for
which they do not have controlling interests through voting or other rights, if they are determined to be the primary beneficiary as a result of variable economic interests. Transfers to a qualifying
special purpose entity are not subject to this interpretation. In December 2003, the FASB issued a complete replacement of FIN 46 (FIN 46R), to clarify certain complexities. We
adopted this financial interpretation on January 1, 2005, as required. The impact of FIN 46R was not significant.

In
November 2004, the FASB issued Statement of Financial Accounting Standards ("SFAS") No. 151, "Inventory Costsan amendment of ARB
No. 43." SFAS No. 151 requires abnormal amounts of idle facility expense, freight, handling costs, and wasted material to be recognized as current-period charges.
It also requires that allocation of fixed production overheads to the costs of conversion be based on the normal capacity of the production facilities. The requirements of the standard will be
effective for inventory costs incurred during fiscal years beginning after June 15, 2005. We are reviewing SFAS No. 151 to determine the statement's impact on our consolidated financial
statements.

In
December 2004, the FASB issued SFAS No. 153,"Exchanges of Nonmonetary Assets an amendment of APB Opinion No. 29."SFAS No. 153 addresses the measurement of exchanges of nonmonetary assets and eliminates the exception from fair value measurement for nonmonetary exchanges of similar productive assets in APB
Opinion No. 29 and replaces it with an exception for exchanges that do not have commercial substance. SFAS No. 153 specifies that a nonmonetary exchange has commercial substance if the
future cash flows of the entity are expected to change significantly as a result of the exchange. The provisions of this standard are effective for nonmonetary exchanges occurring in fiscal periods
beginning after June 15, 2005. We will apply this standard prospectively.

In
December 2004, the FASB issued SFAS No. 123R,"Share Based Payment."SFAS No. 123R requires entities to measure
the cost of employee services received in exchange for an award of equity instruments based on the grant-date fair value of the award. That cost will be recognized over the period during
which the employee is required to provide services in exchange for the award. This standard eliminates the alternative to use the intrinsic value method of accounting for share based payments as
previously provided in APB Opinion No. 25,"Accounting for Stock Issued to Employees."We adopted SFAS No. 123R effective
January 1. 2005, and have applied this standard prospectively to share-based awards issued to our employees in connection with Huntsman Corporation's initial public offering. In connection with
Huntsman Corporation's initial public offering of common and preferred stock on February 16, 2005, certain of our employees received Huntsman Corporation stock options and restricted stock.
Accordingly, we were allocated share-based compensation expense of $0.7 million during the three months ended March 31, 2005. We did not have share-based awards prior to the awards
issued in connection with Huntsman Corporation's initial public offering.

In
March 2005, the FASB issued FIN 47,"Accounting for Conditional Asset Retirement Obligations."FIN 47 clarifies
the termconditional asset retirement obligationused in SFAS No. 143,"Accounting for Asset Retirement
Obligations,"and clarifies when an entity would have sufficient information to

52

---



reasonably
estimate the fair value of an asset retirement obligation. FIN 47 is effective no later than the end of December 31, 2005. We are reviewing FIN 47 to determine its
impact on our financial statements.

In
March 2005, the Emerging Issues Task Force issued a preliminary consensus on issue 04-13, "Accounting for Purchases and Sales of
Inventory with the Same Counterparty," that, if adopted, would require companies to recognize an exchange of finished goods for raw materials or
work-in-process within the same line of business at fair value. All other exchanges of inventory would be reflected at the recorded amount. We are evaluating the impact of this
preliminary consensus to determine its impact on our results of operations.

Critical Accounting Policies

There have been no changes in the first quarter of 2005 with respect to our critical accounting policies as presented in the notes to our financial statements for
the year ended December 31, 2004 included in our 2004 Annual Report on Form 10-K.

Cautionary Statement for Forward-Looking Information

Certain information set forth in this report contains "forward-looking statements" within the meaning of the federal securities laws. Forward-looking statements
include statements concerning our plans, objectives, goals, strategies, future events, future revenues or performance, capital expenditures, financing needs, plans or intentions relating to
acquisitions and other information that is not historical information. In some cases, forward-looking statements can be identified by terminology such as "believes," "expects," "may," "will,"
"should," "anticipates," or "intends" or the negative of such terms or other comparable terminology, or by discussions of strategy. We may also make additional forward-looking statements from time to
time. All such subsequent forward-looking statements, whether written or oral, by us or on our behalf, are also expressly qualified by these cautionary statements.

All
forward-looking statements, including without limitation, management's examination of historical operating trends, are based upon our current expectations and various assumptions.
Our expectations, beliefs and projections are expressed in good faith and we believe there is a reasonable basis for them, but, there can be no assurance that management's expectations, beliefs and
projections will result or be achieved. All forward-looking statements apply only as of the date made. We undertake no obligation to publicly update or revise forward-looking statements which may be
made to reflect events or circumstances after the date made or to reflect the occurrence of unanticipated events.

There
are a number of risks and uncertainties, including those discussed elsewhere in this report, that could cause our actual results to differ materially from the forward-looking
statements contained in or contemplated by this report. Any forward-looking statements should be considered in light of all such factors and the risks specified in our Annual Report on
Form 10-K.

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

We are exposed to market risk, including changes in currency exchange rates, interest rates and certain commodity prices. To manage the volatility relating to
these exposures, from time to time, we enter into
various derivative transactions. We hold and issue derivative financial instruments for economic hedging purposes only.

Interest Rates

As of March 31, 2005, we had entered into approximately $184 million notional amount of interest rate swap transactions, which have remaining terms
ranging from approximately nine to twenty-seven months. The majority of these transactions hedge against movements in U.S. dollar interest rates. The

53

---



U.S.
dollar swap transactions obligate us to pay fixed amounts ranging from 3.8% to 6.6% of the notional amount in exchange for LIBOR-based floating amounts. We do not hedge our interest rate exposure
in a manner that would eliminate the effects of changes in market interest rates on our cash flow and earnings.

As
of March 31, 2005, the estimated value of our consolidated debt was approximately $1,718.4 million and the weighted average interest rate of our combined borrowings was
approximately 8.2%. As of March 31, 2005, we had combined outstanding variable rate borrowings of approximately $1 billion. The weighted average interest rate of these borrowings was
approximately 6.4%. This weighted average rate does not consider the effects of interest rate hedging activities. Assuming a 1.0% increase in interest rates, without giving effect to interest rate
hedges, the effect on the annual interest expense would be an increase of approximately $10 million. This increase would be reduced by approximately $1.8 million on an annualized basis,
as a result of the effects of the interest rate swap transactions described above.

Commodity Prices

Our exposure to changing commodity prices is somewhat limited since the majority of our raw materials are acquired at posted or market related prices, and sales
prices for finished products are generally at market related prices which are largely set on a monthly or quarterly basis in line with industry practice.

Currency Exchange

Our cash flows and earnings are subject to fluctuations due to exchange rate variation. However, our sales prices are typically denominated in U.S. dollars. As a
result, the impact of fluctuations in exchange rates is not material to our cash flows and earnings.

ITEM 4. CONTROLS AND PROCEDURES

In connection with the audit of the financial statements of our parent and its subsidiaries (the "Huntsman Companies" or "Group") for the year ended
December 31, 2003, the Group's independent registered public accounting firm, or auditors, identified several matters that they deemed to be "material weaknesses" in the Group's internal
controls as defined in standards established by the American Institute of Certified Public Accountants. The principal material weakness identified by the auditors was that the Group's controllership
function did not have an adequate formal process in place to gather the data required to prepare the financial statements and disclosures required for the numerous financial reporting requirements of
the Huntsman Companies. The auditors noted that these material weaknesses had led to restatements of the financial statements of certain of the Huntsman Companies, including us, in recent periods.

In
connection with the audit of the Group's financial statements for the year ended December 31, 2004, the auditors did not identify any matters that they deemed to be material
weaknesses. In conducting their audit, however, the auditors did not undertake to audit the Group's internal controls, and thus we cannot give any assurance that they would not have noted additional
material weaknesses, or reiterated the material weaknesses described above, had they done so. Nor can we give any assurance that the auditors will not note additional material weaknesses, or reiterate
the material weaknesses described above, in future audits of the Group's financial statements. Any such material weaknesses could cause the Group to fail to meet its reporting obligations or result in
material misstatements in the Group's financial statements.

Our
management, with the participation of our chief executive officer and chief financial officer, has evaluated the effectiveness of our disclosure controls and procedures (as defined
in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934 (the "Exchange Act")) as of March 31, 2005.

54

---



Based
on this evaluation, our chief executive officer and chief financial officer have concluded that, as of March 31, 2005, our disclosure controls and procedures were effective, in that they
provide reasonable assurance that information required to be disclosed by our Company in the reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported
within the time periods specified in the applicable rules and forms.

No
change in our internal control over financial reporting occurred during the three months ended March 31, 2005 that has materially affected, or is reasonably likely to
materially affect, our internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act). The Group has engaged
Ernst & Young LLP to assist the Group's management in its evaluation of the Group's internal controls in preparation for the periodic management evaluations and annual auditor attestation
reports regarding the effectiveness of its "internal control over financial reporting" that will be required when the SEC's rules under Section 404 of the Sarbanes-Oxley Act of 2002 become
applicable to the Group beginning with its Annual Reports on Form 10-K for the year ending December 31, 2006 to be filed in the first quarter of 2007. We cannot give any
assurance, however, that the Group's internal controls will be effective when Section 404 becomes applicable to it. Ineffective internal controls could cause investors to lose confidence in the
Group's reported financial information and could result in a lower trading price for the Group's securities.

55

---





PART II. OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

We are a party to various lawsuits brought by persons alleging personal injuries and/or property damage based upon alleged exposure to toxic air emissions. For
example, since June 2003, a number of lawsuits have been filed in state district court in Jefferson County, Texas against several local chemical plants and refineries, including our subsidiary,
Huntsman Petrochemical Corporation. Generally, these lawsuits allege that the refineries and chemical plants located in the vicinity of the plaintiffs' homes discharged chemicals into the air that
interfere with use and enjoyment of property and cause health problems and/or property damages. None of these lawsuits include the amount of damages being sought. Because these cases are still in the
initial stages, we do not have sufficient information at the present time to estimate the amount or range of reasonably possible loss. The following table presents information about the number of
claims asserting damages based upon alleged exposure to toxic air emissions for the period indicated. Claims include all claims for which service has been received by us, and each such claim
represents a plaintiff who is pursuing a claim against us.

Three months ended
March 31, 2005Claims filed during period

0Claims resolved during period

749Claims unresolved at end of period

135


We
believe that we have valid defenses to these claims and, to the extent that we are not able to otherwise reach an appropriate resolution of these claims, we intend to defend them vigorously.

In
addition, we have been named as a "premises defendant" in a number of asbestos exposure cases, typically a claim by a non-employee of exposure to asbestos while at a
facility. These cases typically involve multiple plaintiffs bringing actions against multiple defendants, and the complaint does not indicate which plaintiffs are making claims against which
defendants, where or how the alleged injuries occurred, or what injuries each plaintiff claims. These facts, which are central to any estimate of probable loss, can be learned only through discovery.

Where
the alleged exposure occurred prior to our ownership or operation of the relevant "premises," the prior owners and operators generally have contractually agreed to retain liability
for, and to indemnify us against, asbestos exposure claims. This indemnification is not subject to any time or dollar amount limitations. Upon service of a complaint in one of these cases, we tender
it to the prior owner or operator. None of the complaints in these cases state the amount of damages being sought. The prior owner or operator accepts responsibility for the conduct of the defense of
the cases and payment of any amounts due to the claimants. In our ten-year experience with tendering these cases, we have not made any payment with respect to any tendered asbestos cases.
We believe that the prior owners or operators have the intention and ability to continue to honor their indemnities, although we cannot assure you that they will continue to do so or that we will not
be liable for these cases if they do not.

The
following table presents for the period indicated certain information about cases for which service has been received that we have tendered to the prior owner or operator, all of
which have been accepted.

Three months ended
March 31, 2005Tendered during the period

19Resolved during the period

9Unresolved at end of the period

408


56

---



We
have never made any payments with respect to these cases. As of March 31, 2005, we had an accrued liability of $12.5 million relating to these cases and a corresponding receivable of
$12.5 million relating to our indemnity protection with respect to these cases. We cannot assure you that our liability will not exceed our accruals or that our liability associated with these
cases would not be material to our financial condition, results of operations or liquidity.

Certain
cases in which we are a "premises defendant" are not subject to indemnification by prior owners or operators. The following table presents for the period indicated certain
information about these cases. Cases include all cases for which service has been received by us.

Three months ended
March 31, 2005Filed during period

4Resolved during period

1Unresolved at end of period

32


We
paid gross settlement costs for asbestos exposure cases that are not subject to indemnification of approximately $5,000 during the three months ended March 31, 2005.

As
of March 31, 2005, we had accrued reserves of $1.2 million relating to these cases. We cannot assure you that our liability will not exceed our accruals or that our
liability associated with these cases would not be material to our financial condition, results of operations or liquidity.

We
are a party to various other proceedings instituted by private plaintiffs, governmental authorities and others arising under provisions of applicable laws, including various
environmental, products liability and other laws. Except as otherwise disclosed in this report, we do not believe that the outcome of any of these matters will have a material adverse effect on our
financial condition, results of operations or liquidity. See "Part I, Item II, Management's Discussion and Analysis of Financial Condition and Results of
OperationsEnvironmental, Health and Safety Matters" for a discussion of environmental proceedings.

ITEM 6. EXHIBITS

|31.1 |  | Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
|---- |  | --------------------------------------------------------------------------------------------------
|31.2 |  | Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
|32.1 |  | Certification of Chief Executive Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
|32.2 |  | Certification of Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

57

---





SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned
thereunto duly authorized.

|Dated: May 11, 2005 |  | HUNTSMAN LLC                                                                                                                               
|------------------- |  | -------------------------------------------------------------------------------------------------------------------------------------------
|                    |  | /s/J. KIMO ESPLINJ. Kimo Esplin Executive Vice President and Chief Financial Officer
(Authorized Signatory and Principal Financial Officer)
|                    |  |                                                                                                                                            
|                    |  | /s/L. RUSSELL HEALYL. Russell Healy Vice President and Controller (Authorized Signatory and Principal
Accounting Officer)                  

58

---



EXHIBIT INDEX

|Number |  | Description of Exhibits                                                                           
|------ |  | --------------------------------------------------------------------------------------------------
|31.1   |  | Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
|31.2   |  | Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
|32.1   |  | Certification of Chief Executive Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
|32.2   |  | Certification of Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

---